Choosing the right bank card for you can sometimes feel overwhelming. There are so many types of cards and the pros and cons aren’t always clear. This is a common challenge, so we’ve put together a guide to help clarify the different types of bank cards and their features. With this information at hand, you’ll feel more confident in making the safest and best choice for your financial needs.
Credit vs debit cards
Credit and debit cards are financial instruments that banks (and other financial institutions) offer to help you manage your finances. They can be used both for personal use or for your business.
There's a huge variety of financial products out there that can assist you with investing, saving, and/or accessing some type of financing. Typically credit cards are aimed at helping you get access to financing, while debit cards help with savings.
The best option for you depends on your needs. We've outlined some important factors below to help you select the best bank card.
Your ability to pay
If your household budget is limited and there isn’t much room for extra monthly payments, you might not benefit from credit.
Your income stability
Having a steady source of income is key to payment planning. Depending on your income stability, it may be more or less challenging to make regular payments.
Organizing your personal finances
Keeping your finances organized is essential for making timely payments and calculating your household expenses over time.
Your financial goals
Using a credit card can be a good option if you need to defer your payments and stretch your spending for a period of time. However, if you want to start saving, debit is the better choice.
What is a debit card?
A debit card is a financial instrument that allows people to save and use the money in their account whenever they want. It’s like an electronic wallet. With your debit bank card, you can only spend the amount in your checking and savings accounts.
Advantages of debit
- Accessible to anyone, no credit history is required
- Greater control over your money
- Greater security (compared to cash and checkbooks)
- Lower operating costs
Disadvantages of debit
- Limited use (depending on balance)
- Less fraud protection
- Fewer promotions or rewards
Requirements for getting a debit bank card
- Proof of U.S. address
- Driver's license or official ID
- SSN*, ITIN** or a Mexican Matricula Consular (Only PODERcard)
- Initial deposit
Keep in mind that requirements can vary from one bank to another.*Social Security Number
**Individual Taxpayer Identification Number
What is a credit card?
A credit bank card lets you make purchases that you can pay for at a later time. By using it, the cardholder isn’t paying with his/her own money. Instead, the bank is lending them the money in the form of credit.
In other words, credit is borrowed money that will have to be repaid, either at the end of the month, or with a minimum percentage or a fixed installment.
By making payments on time you can build a good credit score, which, in turn benefits your personal finances in the long run.
Advantages of credit
- Build a credit history
- A variety of promotions or rewards to choose from
- More time to pay for purchases
- Greater fraud protection
Disadvantages of credit
- Higher operating costs
- Interest payments
- Increased risk of getting into debt
Requirements for getting a credit bank card
- Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN)
- Proof of U.S. address
- Proof of income
- Checking or savings accounts in your name
Some banks offer flexible terms for students or people who don’t have a social security number. Ask about requirements at different financial institutions and choose the one that best suits your needs.
Remember that having a credit history is essential for living in the U.S., as it will impact your ability to access services such as internet or phone plans, rent a car, buy a house or even get a job.
Which bank card is best for you?
In reality, there isn’t one bank card that is better or worse. The biggest difference is the payment method. With a credit card, the bank finances the purchase and defers payment. Whereas a debit card allows payments to be charged directly to the customer's account. This means that the bank doesn’t finance the purchase and therefore won’t charge fees or interest.
Deciding which bank card is better depends on your specific needs but keep in mind that you can always apply for both types in order to take advantage of their unique features.