Just pick
one. I have the WD My Passport Ultra 1TB and i have no issues with it.
TimeCapsule will be easier(fully automated), but the price on those are much higher.
When using a USB drive for TimeMachine backups it will require "more" from you in regard to the fact that each time you want to do a backup you have to manually connect the USB drive to your mac.
There are "workarounds" that some use to get USB drives connected to a router to act as an TimeCapsule, but keep in mind this requires a bit more knowledge and fiddling around to get it to work...And this way you don´t have 100% guarantee that backups will happen without issues.
With a TimeCapsule this will be done wirelessly and automatic, so when TimeMachine is configured no further action is required from you. Backups is done automatically, And thus you always have a up to date backup of your mac.
Option 1) If you want the most affordable option, then go with the USB drive.
Option 2) If you want to have all backups automated (of your files/settings etc without ever needing to do anything manually and can afford it) then go with a TimeCapsule.
With both options the end result will be exactly the same.