Credit Cards, Debit Cards, and Credit

Debit

When you use a debit card, the money you are spending gets deducted from your checking account as you are making the purchase. 

Credit

When you use a credit card, the money you are spending gets added to your line of credit which is payed at a later date. You are essentially borrowing money from the card issuer.  

The Difference Between Credit and Debit

Credit decreases assets and costs, as well as, increases liability, equity, and revenue; whereas debit increases assets and costs, as well as, decreases liability, equity, and revenue.

A debit card can help you stay within your budget and prevent debt. Debit cards also are relatively inexpensive to have since there is not much of a fee. However, debit cards can cause issues when making larger purchases. 

Credit cards can help build credit, but on the flip side, they can also hurt it. Credit cards have high limits for larger purchases, but that can also get you into hefty debt. Credit cards also allow you to pay after a grace period which can be particularly helpful for larger purchases.

Credit Score

A credit score assesses a card holder's credibility. Credit scores are used to help determine whether or not the loaner should loan money to the borrower based on their past credit history. Credit scores range between 300-850, and the higher your credit score, the higher your creditworthiness. Credit scores are a key element of your fiscal viability. You want an excellent credit scores since they can release a lot of income, such as access to the most favorable terms on loans and credit cards. It is very beneficial to have a high credit score because it can get you substantial savings on interests, good terms loan, availability of best credit cards, insurance discounts, better housing choices, and security deposit waivers on utilities.

Factors Affecting Credit Score

Your payment history and length of credit history affect 35%, and 15% on your credit score respectively. The percentage for amounts owed is 30 whereas both new credit and types of credit in Use affect 10% individually. Generally, a credit score above 700 is a good one.

CR & DR

In accounting, CR (Credit) shows the right side of the account, and DR (Debit) shows the left.