Credit Cards and Debit Cards: What are the Differences?

Both cards we used them in the daily basis and offer convenience in term of payment. The primary difference between a debit card and a credit card account is where the cards draw the money. A debit card takes it from banking account and a credit card charges it to the line of credit. Before going further, let’s examine both cards one by one.

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Debit cards

Debit cards draw money directly from checking account when making the purchase. The process is placing a hold on the amount of the purchase, then the merchant sends in the transaction to their bank and it is transferred to the merchant’s account. The process can take a few days, and the hold may drop off before the transaction goes through. Debit cards require a PIN at stores or ATMs. A debit card is also able to use without a PIN at most merchants and replaced by signing the receipt like normally works a credit card.

Credit cards

Credit cards allow the holder to borrow money in small amounts at local merchants. The credit card company or issuer then charges interest on the purchases, though there is generally a number period of approximately thirty days before interest is charged if the holders do not carry the balance over from month to month.

Debit Cards vs Credit Cards

Credit cards are used in various transactions and provide convenience to the holders either online or offline. For instance, paying rent a car, flight ticket or to purchase items online. Many also argued that credit cards are safer than carrying cash and chequebook. Debit cards actually also offer the same convenience without borrowing money to complete the transaction. Credit cards today also offer easiness in term of taking credit when purchasing goods and interesting offers in the hype and popular shops, which not many debit cards seldom offered. Many also feel that credit cards offers additional insurance on the purchase and make it easier to request a refund. In this case, it is advisable to read term and condition of the credit card before to understand fully the benefits offered.

By understanding the difference between a debit card and credit card, it allows making wise financial decisions. Despite a lot more offers from credit cards, it is recommended to use debit card whenever possible. Even better if paying cash for most items purchased, because the purchase is basically made aware how much money left. Often the case that people falling into the credit card trap. In theory, credit card holders who pay off their balance each month are generally not considered to have credit card debt. The debt will occur to users who continue to carry a balance on their credit cards after the grace period has expired and the debt begins to bear interest. Credit card holders who carry a balance do not have a grace period, interest is charged on new purchases immediately. Credit cards often persuade the holders to pay only a small minimum payment, promoting the use of the card as a longer-term loan. Still, many financial experts advise paying off all credit card debt as an early step to improving one’s financial situation.

Protecting the cards

Both a credit and debit card have similar risks when it comes to theft. If somehow credit or debit card information has been compromised, it is recommended to contact bank issuer immediately. Another thing that you can do is taking additional steps and monitor credit report to make sure that identity was not stolen, It is important to check statements each month to make sure the identification of all charges. Normally, the banks limit the length of time that you can report a fraudulent charge on the account. The bank will freeze the account and issue you a new card when you report that the card has been stolen or you see an unauthorised transaction.