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I was looking to buy a new low powered graphics card, which was offered with two memory amounts, 256 and 512. I have heard however that sometimes it isn't worth going for the larger memory amount as it is rarly used.

Is there any truth in this, and if so, what are the factors that don't make it worth going for the card with the larger worth it? (What other specs of the card mean that the additional memory can't be used)

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It depends on your use of the card. More RAM on a video card does not make it faster so to say, it just allows more textures and information to be loaded. You will see benefit from higher RAM if you run high resolutions and multiple monitors. Is it worth the extra cost though with a low end card? Most likely not. So, if the cards are similarly priced, might as well get the extra RAM, but keep in mind your performance/price. I would much rather have a faster card with 256mb ram, then a slow card card with 512mb.

The lower end cards are limited by 64bit and 128bit memory buses, so more RAM doesn't help if your "pipe" can only transfer so much information.

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A few months ago, I saw one brand that had 512MB GDDR5 cards and 1GB DDR3 cards for the same price. I bought the 512MB GDDR5 card. –  Powerlord Sep 2 '10 at 20:56

There's two schools of thought on this:

1 - The incremental expense of the extra memory is trivial compared to the cost of the card.
2 - If you are getting a low powered card, why bother spending the extra on additional memory if the increase in performance is also going to be trivial?

Personally I think, why bother? If you have an under-powered card, you won't notice much of a difference. 10 fps and 15 fps are pretty equally unplayable for most games.

If you are doing development or video/image editing you may notice a difference, since high resolution images and textures will be quicker to load, but again why bother since it will still be EXTREMELY slow on an underpowered card.

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