I'm about to buy my first loose powder and I need some advice.
First, can someone tell me what does loose powder generally do, because by reading descriptions of several products, I came to conclusion that loose powder and foundation can be used interchangeably. Is it true?

I just need something to matte my face during the day, set make-up and remove dark circles under eyes (along with concealer, of course). I also wouldn't come against, if it would cover blemishes, because my face is full of them (even though my foundation does great work). So do I need a colored powder or transparent would be enough? What's the difference between those two?

Powder sets the foundation, mattifies the foundation, makes it last longer. There are so many powders! Some add a bit of sparkle, some clarify-cut oiliness, some have polyymers that prevent them from settling in wrinkles,some are talc or cornstartch based or mixtures of these or synthetics (which is not always a bad thing). Powder should not be used to hide blemishes but to finish your makeup-think "airbrushing". Some people like to match their powders exactly to their foundations for more coverage, some choose a transparent powder-its the preference of the person and how much cover they need.
You will want to apply powder with a clean puff. I like disposable cotten pads-and buff off the excess with a buffing brush-although some people fluff it off with a powder brush for less coverage. I am a big powder person so I press it in, wait, buff it down and repeat. The result is matte skin but a natural no makeup look (works well if you get photographed alot).

Powder in compacts are more concentrated,heavier.

I am not a compact care. I carry oil blotting tissues impregnated with transparent powder.

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Russian/Chinese, from planet NARS, age 45. "If its pink and sparkley I will shoot it...."