Difference Between Debit Card and Credit Card

Difference Between Debit Card and Credit Card

Difference Between Debit Card and Credit Card

Plastic money, such as debit cards and credits card, has already made a huge impact on a consumer’s everyday life. The convenience brought by using these cards keeps a country’s economy growing. Purchasing goods and/or services have been made easy by inserting or swiping these cards into the merchants’ card reader in order to pay for it. Debit cards and credit cards eliminate the need to actually bring a huge amount of cash when essential and nonessential items. These cards are usually issued by banks to their customers.

Debit cards are basically an example of plastic money where money is taken directly from a card holder’s checking account upon making a purchase. With this, your spending is limited to the funds in your checking account, and the exact amount you have to spend, as well as your account balance, will fluctuate from day to day.

The bank put a hold on the amount you’ve spent when you use a debit card. The money will either move out of your account instantly or be held by the bank for 24 hours or longer, depending on the purchase amount and your bank. Debit cards work with major credit card companies like VISA and Mastercard to let you use your debit card everywhere those branded cards are accepted.

Credit cards, on the other hand, are also an example of plastic money wherein the amount of a purchase is directly applied to a card holder’s outstanding balance. Like debit cards, these can also be used to purchase essential and nonessential goods and/or services without the need to carry a huge amount of cash. A credit card functions primarily as a debt that must be repaid.

The maximum amount a cardholder can borrow is determined by his/her credit limit set by the credit card issuer. As per the terms of your credit card agreement, this loan has an annual percentage rate, which is the rate you’ll pay if interest charges arise. You can borrow again once you’ve paid off what you’ve borrowed.

Although both debit cards and credit cards have similarities with each other, they also differ from one another in terms of their uses and features. One card gives you a revolving loan, while the other takes money out of your account. You may be held accountable for unauthorized charges made by a fraudster depending on the card you choose.

Knowing the difference may help a person to fully decide which one to get by having proper knowledge about it. Also, in your wallet, you most likely have at least one credit card and one debit card. The convenience and security they provide are hard to top, but there are some key differences that could have a significant financial impact.

The difference Between Debit Card and Credit Card:

  • When a debit card is used, money is deducted immediately from the user’s checking account while credit cards have certain credit limits which is the amount of money that your credit card issuer permits you to spend or pay bills with.
  • Debit cards do not help build a card holder’s credit history but credit cards do.
  • Debit cards normally have daily purchase restrictions, so it’s unlikely that you’ll be able to make a particularly significant purchase with one while credit cards can be used to make purchases up to the credit limit. After that, you’ll have to pay it back at a later time.
  • Debit cards can be accessed through automated teller machines (ATMs) while credit cards come with a monthly bill.
  • Meeting the required daily balance lets you earn an interest when using a debit card while carrying a credit card balance might result in interest charges.
  • Impulsive buyers can avoid the temptation of credit and adhere to their budget by using debit cards. On the other hand, when you use a credit card, you’re spending the money of the bank, not your own, so it further promotes impulsive buying especially to those who don’t know the basics of budgeting.
  • Debit cards are not debt instruments but credit cards are.
  • Debit cards won’t charge you any fees unless you went under its required minimum monthly average daily balance (ADB) while owning credit cards automatically gives you an obligation to pay fees annually.
  • Debit cards may not be a huge help during emergency purpose especially when it lacks sufficient funds while credit cards can help you get by in an emergency by providing you a month to come up with the money before the bill is due.
  • If someone steals your debit card information and you don’t disclose it within 60 days of receiving your bill, you might be held entirely responsible for all of their fraudulent purchases. On the other hand, you can only be held liable for $50 if you are a victim of credit card fraud according to the law.
  • Debit cards are a great method to keep track of your spending and living within your means while credit cards let you run the risk of spending beyond your means.
  • Debit cards would not stress you out thinking of the monthly bills due together with its interest while credit cards’ balances are best paid in full and might give you a huge headache where to get that certain amount of money.

You can make purchases with your debit card in the same way that you would with a credit card. This can be done in a variety of locations, including merchant stores, restaurants, and e-commerce platforms. Depending on the person, each card has its own set of uses and benefits so choosing the right one for you might put you in a hard situation, especially when you do not know your attitude towards purchasing goods and/or services.

When deciding whether to use a credit card or a debit card, be honest with yourself about your credit-handling abilities. If you have a spending problem, you should utilize your debit card whenever possible to avoid getting into credit card debt.