Credit Cards, Debit Cards, and Debt

These days, it's standard to make many—or even most—of our purchases with credit cards or debit cards. Although credit cards and debit cards work similarly at the register, they are very different at the bank. Since credit cards are a major source of debt for millions of Americans, understanding the differences between credit cards and debit cards can help you avoid building up more debt.

The primary difference between credit and debit is the source of funds. Debit card purchases are drawn directly from your bank account, as if you wrote a check or withdrew cash. When you buy something with a credit card, however, you are essentially taking out a loan for that purchase. Credit card companies do not require you to repay that “loan” immediately: if you make the minimum payment each month, the debt carries over and builds interest.

Credit cards are useful for the same reason they are dangerous: you don't have to have the money on hand to make a purchase. If you wanted to buy a computer with your debit card, you would have to have enough money in your checking account to pay for it. A credit card allows you to make that purchase. However, if you are unable to pay it off quickly, the interest will build and build.

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Even if you use your credit card responsibly, circumstances can change. Sometimes even the most financially responsible people find themselves facing thousands of dollars in unexpected medical bills. If you are struggling with debt, no matter what the cause, filing for bankruptcy can relieve many of your financial problems. The Boston bankruptcy lawyers of Joshua Spirn & Associates can help you evaluate your finances and create a plan for paying off your debts. To discuss your case with our experienced lawyers, contact us today at 800-975-5346.