How Credit, Debit & Prepaid Cards in Your Wallet Stack Up

Which Credit Card Should You Use, Why and When

American's wallets feel heavy, but they're not stuffed with bills. At any given time, the average American carries 11 cards in their wallet, a mix of credit cards, debit cards and prepaid cards.

Why the plastic? Each type of card carries its own rewards and drawbacks.

These cards can be divided into three basic categories: "Pay Later," "Pay Now" and "Pay Before."

Credit Cards: Most Americans possess a "Pay Later" card, a typical credit card.

If used correctly, credit cards can help consumers build their credit scores. These cards can help Americans finance important purchases, like major appliances and other large purchases. Credit cards also provide "emergency" funds for unexpected purchases.

Debit cards prove a popular "Pay Now" choice.

Many households use debit cards to manage spending. Because debit cards limit withdrawals to the amount in a checking account, consumers use them as they would a check without the hassles of actually writing paper checks. Debit card owners can also withdraw cash from ATMs. People using debit cards need to keep track of their balance to avoid any overdraft charges and must be eligible for a bank account to receive one.

"Pay Before" cards, also known as "prepaid cards," help a variety of consumers stay within their budgets.

Most consumers are familiar with prepaid gift cards, but a new generation of prepaid cards can be used to pay bills and get cash from ATMs. The cardholder loads a set amount of funds on the card, and that provides the limit.

Prepaid cards do not require cardholders to hold bank accounts or pass a credit check, but can be used like credit or debit cards to make purchases. A prepaid card carrying a brand logo - American Express, Discover, MasterCard or Visa - can be used at any store that accepts its brand. Prepaid cards keep Americans feeling safe - they eliminate worries about interest rates and identity theft. It is still important to keep track of the balance on a prepaid card and stick to a responsible spending plan.

People can buy prepaid cards online, at stores or at financial institutions.

Cards have proven to be more popular and convenient than cash. Many Americans can use cards to eliminate, not create, debt - if they choose the right card for their financial situation and lifestyle.

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How Credit, Debit & Prepaid Cards in Your Wallet Stack Up | Personal Finance Safety | iHaveNet.com