Credits vs. Debits

Credits vs. Debits

Credits vs. Debits

The two terminologies in the title have many people confused.  Most understand and believe that one is just the same as the other.  This is far from true.

Let’s first discuss Credits.  Credit equals accounts to which you owe money.  The simpler way to say this is that if you purchase something on credit, you will not have to pay for it right away.  Sounds great doesn’t it?  This is where an overwhelming population starts getting into financial trouble.  They see an item or service they would like to have and place the charges on their credit card or on an in-store credit account.  Then when the payment arrives, they may not have the needed money to pay for it.  This results in possible loss of the item or service and a very negative reflection on your credit rating.  The negative credit rating will result in you possibly not being approved for a new line of credit and, if approved, a much higher percentage rating because you are considered a credit risk. That is money you could be saving if you had a lower percentage rating.

Now let’s discuss the definition and use of Debits.  Debit equals accounts in which you have money.  This includes your bank or savings account where you place your regular income on a given basis.  By using a debit card instead of a credit card, when you purchase an item or service, there won’t be a bill coming in at a later date.  When you first buy that item or service, the transaction is over and the bill is paid in full.  This does away with the possibility of you not being able to pay for it at a later date.

When it comes to figuring in a household budget, it is much simpler to add entries into your budgeting software, such as Easy Budgeter, by utilizing a debit transaction.  This keeps your budget in the “black” and no possibilities of forgetting to add in a new expense.

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John Mills

Independent Reviewer