Gone are the days where the average American relies on cash to buy a car, pay for their gym membership, or cover their daily shopping. Instead, society is headed straight towards a digital-first, cashless system. Of course, this can make it nearly impossible not to have some type of card in your (digital) wallet, but how do you know which electronic payment matches your needs best?
Although all electronic forms of payment are convenient, it’s still hard to know if you should opt for a credit card, secured credit card, or debit card without understanding their features as well as their differences.
What is a debit card?
A debit card is a payment card that can be used to make purchases instead of using cash. The funds will instantly be debited from your online bank account instead of accruing a monthly statement like a traditional credit card. Using a debit card offers fast access to your funds while benefiting from payment protections.
Traditional debit card Pros and Cons
✅ Save money with no fees
Unlike most traditional credit cards, debit cardholders won’t be hit with an annual fee to keep their accounts active.
✅ Make debt-free purchases
When debit card users spend their funds from their bank account, the debit card transactions are entirely debt-free. Not everyone is comfortable taking on debt so this makes debit cards a great fit for users who want to make electronic payments without a lump sum due at the end of the month like a traditional credit card.
✅ Fraud protection
Even though debit cards only allow payments using deposited funds, they have an advantage over traditional cash. Debit cards offer fraud protection that protects your funds and accounts from unauthorized transactions and users.
❌ Not great for building credit
Unfortunately, at traditional banks and other digital banking services a history of debit card purchases isn’t enough to show credit card or loan issuers your ability to make timely payments. Traditional debit cards are not the best option for someone looking to build or repair their credit history.
❌ Lack of reward programs
Credit cardholders can enjoy extra rewards from their daily purchases, whether it’s miles, points, or cashback, but debit spending doesn’t offer the same advantages. If you’re hoping to finance your next flight using reward points, then a debit card might not be the best option for you.
How does One’s debit card compare to traditional debit cards?
One’s debit card is not your average debit card. It has the ability to transform but we’ll get into that later in the article. Unlike traditional debit cards, One’s debit card can…
❇️ Build credit history automatically
Traditional debit cards don’t have the ability to help you build up your positive credit history, but One’s can! Qualifying customers can access Credit Builder to help build their credit automatically. There’s no extra application or new card issued, just add Credit Builder to your One account then start spending to auto-build your credit history and help boost your credit score. Credit Builder makes automatic full on-time payments every month to help build up your history.†
❇️ Automatically save when you spend
Remember the old days with the random change jar by the door? Emptying your pockets at the end of every day to collect extra money. Well, One’s debit card does that, digitally! One customers can enable card Auto-Save to automatically round up their debit card purchases to the next dollar then auto-transfer the difference into their Auto-Save Pocket that earns unlimited 3.00% APY*.
❇️ Fee-free overdraft
If you’re still with a traditional bank, overdraft fees might be a familiar (and disappointing) line item on your monthly statement. One customers who use their debit card can enroll in fee-free overdraft protection to cover any transactions that take their account below zero without any fees. There’s no interest when repaid within the month you borrow. If you need to carry a balance you’ll pay 1% a month, 12% APR.⁑
❇️ Pocket Protector
An additional feature available to One customers that helps to avoid declined transactions is Pocket Protector. It’s very similar to overdraft protection but instead of opening a line of credit, One customers can enable Pocket Protector to automatically pull available funds from their Spend Pocket to cover any transactions that may take their balance below zero.
❇️ Access 55,000 fee-free ATMs
When traditional banks have a small ATM network, it’s the customers that bear the brunt of it with fee on top of fee. Fees to withdraw cash, fees because the ATM was out of network, and various others. One customers enjoy a vast network of fee-free ATMs across the US to easily withdraw cash when and where they need it.
❇️ Create a virtual card
If you haven’t heard of virtual cards, you’re in for a treat. Virtual cards can help keep your online account extra secure by creating a unique card number for each Pocket. This helps to minimize the exposure of your primary card number in case a merchant or online provider has a security breach.
❇️ Spend from different Pockets
Unlike traditional debit cards that only pull funds from one account, One’s debit card can be reassigned to any Pocket! Having the ability to switch from Pocket to Pocket helps you spend only the funds within that Pocket instead of one lump sum in a general account. Quickly reassign your One card in the One app to spend from your “Groceries” Pocket then to “Gas” Pocket, then reassign to “Save” Pocket. Just one tap then you’re on your way!
What is a credit card?
A credit card allows a cardholder to use borrowed funds from the same financial institution that issued the card. Cardholders are expected to pay the money back in total plus interest, depending on the financial institution’s credit card terms.
Traditional credit card Pros and Cons
✅ Build your credit history
Using a traditional credit card can boost your credit score if used responsibly. In addition, cardholders who show they can responsibly pay their bills can open the door for a higher credit limit, lower interest rate, or better reward programs!
✅ Protection from fraud
Traditional credit cards tend to offer significantly more protection than traditional debit cards. Therefore, it’s vital to prioritize reporting any fraudulent or unauthorized charges.
❌ Risk falling into a debt trap
Since you’re making purchases on credit instead of cash available, you might not be able to pay your balance off after the promotional period ends and extremely high-interest rates begin to build more debt.
❌ Various fees
If you have a credit card, then you’re already familiar with the fees. Many credit cards have an annual fee, late payment fee, or even a foreign transaction fee. Keep in mind the extra costs you’ll need to pay on top of interest and minimum payments due.
How does One’s card compare to traditional credit cards?
Remember we mentioned One’s debit card is a magical shapeshifter? Well, the same card that was once debit can change into a credit card. Qualifying paycheck direct deposit customers can access a line of credit up to $10,000. Unlike traditional credit cards, One’s card can…
❇️ Access affordable credit at 1% interest a month | 12% APR⁑
Traditional credit cards disproportionately lock out minorities and the “credit invisible” to affordable lines of credit. They tend to only focus on customer FICO scores and this results in limited approvals for credit, extremely small limits, and higher interest rates. Qualifying paycheck direct deposit customers can access a fee-free Credit Line at an industry-low 12% APR⁑ to help spread out the cost of a purchase or keep cash available in their account throughout the month. If the balance is repaid before the next billing cycle there is no interest owed.
❇️ Credit that grows with time
One customers who enable Credit Line will see their available credit grow over time with every qualifying direct deposit and can eventually borrow up to $10,000 at the same affordable rate of 12% APR⁑.
❇️ Spend from different Pockets
Unlike traditional credit cards, One’s card can turn from a credit card to a debit card then back to a credit card. Just reassign your One card in the One app to choose how you’d like to spend, like debit or credit!
What is a secured credit card?
A secured credit card requires the cardholder to deposit funds with the financial institution to open an account. The deposited funds are held by the credit card issuer as a security deposit, to ensure you’re able to pay your bill once the statement arrives. Also, since the credit limit for a secured credit card matches your deposit amount, your credit limit can change month to month.
Traditional secured credit card Pros and Cons
✅ Lowered credit history expectations
A secured credit card is similar to a standard credit card, except an individual is expected to pay a security deposit. This security deposit is why secured credit cardholders usually don’t need stellar credit for application approval. This makes a secured credit card a perfect fit for someone with low, limited, or no credit history.
✅ Establish or improve your credit history
Secured credit cards are an excellent option for people at the beginning stages of building a credit history. It’s a great way for individuals searching for a way to raise their available credit by proving they’re able to make on-time full payments every month.
❌ Higher interest rates
Typically secured credit cards have higher interest rates than the standard credit card because there’s more of a risk to the issuer that the cardholder may default on their payment. This is why it’s critical to make on-time payments when using a secured credit card if you want to minimize an excessively high bill.
❌ Multiple fees
A traditional secured credit card generally has various fees, including processing, application, or annual. Typically, fees depend on the card issuer, making it essential to shop around for the lowest fees.
How does One’s secured credit card compare to traditional secured credit cards?
Same card, same magical abilities. One’s debit card can morph into a secured credit card with Credit Builder. Qualifying customers can access Credit Builder without any additional applications, no fees, no minimums, and no new card. Easily add the Credit Builder Pocket to your One account to start building credit history. Unlike traditional secured credit cards, One’s Credit Builder can…
❇️ Build credit history automatically without fees
Automatically build positive credit history with Credit Builder. One has designed an easy way to build or rebuild your credit score. Credit Builder makes automatic full on-time payments every month to help build up your history. There are no fees, no credit checks, no new account or new card needed to start using.†
❇️ Spend from different Pockets
Unlike traditional secured credit cards, One’s card can morph back and forth with a few taps in the One app. Switch your card to spend from the Credit Builder Pocket then back to your Spend Pocket with a few easy taps.
Ultimately, secured credit cards, standard credit cards, and debit cards all have advantages and disadvantages but thankfully there is a place where you can get all three options in one easy-to-use card and account! It’s always best to do your research to find the best option is the electronic payment that fits your personal needs and financial goals.