By Joanna Caouette, Director of Programs at ProsperityME 

In the U.S., there are many types of payment cards, and it’s important to understand the differences between them, so you can use them correctly. 

Debit card: 

A debit card is a card that is tied to your checking account. This means that whenever you use your debit card, you are paying with your own money. Debit cards can be used almost anywhere and are a safer way to access your money than carrying cash with you every day, since they are protected by a password. Debit cards do not typically affect your credit score. 

Credit card: 

Credit cards offer a line of credit. This means they are not tied to your bank account, and give you access to borrowing money that is not yours. Credit cards are like a loan that must be paid back in the future. Typically, you will receive a bill every month detailing the amount you used. The bill will also have a due date by which you must make a minimum payment. If you fail to make the payment on time, the missed payment will be mentioned on your credit report and will impact your credit score. Also, you will be charged interest on any balance that remains. 

Social benefits cards: 

Benefits cards are a form of prepaid cards that the federal government uses to deliver certain benefits, such as Social Security or food stamps, to those who qualify. Each month, funds are deposited by the government for the client to use. A case manager or social services provider should be able to explain where the benefits cards can be spent. Misusing cards can lead to an interruption of services, so correctly using the cards is very important. You do not typically have to pay back any funds used on your social benefits cards, and using this card will not affect your credit score. 

Gift cards: 

These are prepaid cards that you receive as gifts. Usually, the amount is listed on the gift card, or you can check the amount when you register the card online. You can use these cards with any vendor up to the limit on the card. Once the limit is reached, you can dispose of the gift card. Gift cards are usually given by friends or family, or sometimes can be won at a raffle. Using a gift card will not affect your credit score. 

Store gift cards: 

Store gift cards can only be used in specific stores listed on the card. These cards do not affect your credit score.