Difference between Debit Card and Credit Card

Cash has always been the king when it comes to paying for purchases and other services that you have availed. Credit cards were introduced later on and it became the norm for people to sign up for one and use it as means to pay. With the recent changes in the economy and challenges in keeping expenses and income balanced, many people have forgone signing up for credit cards.

However, many want to have the convenience of using credit cards without bringing cash — and without the worry of credit card fees and interest. Hence, the introduction of debit cards into the financial world.

What Is Different About A Debit Card?

A debit card is used to pay for goods and services much like a credit card in the sense that you do not carry cash. However, the main difference between the two is where the money comes from to pay for your transactions. A debit card is directly attached to it affiliated bank account. The amount is deducted from the bank account balance.

Paying with a credit card is like getting a short-term loan from the bank, and the account is different from that of your bank account. Debit cards can also be prepaid cards that can be loaded with any amount of money that can be used to pay for your purchases. These prepaid cards are not attached to any bank account, and any money inside them will not gain interest like a savings account will.

Debit card application is also easier. In many instances, banks issue a debit card as soon as you open an account with them. In fact, most banks use the ATM card as the debit card. Debit cards are not dependent on your credit score and you will not be subjected to a credit check.

Advantages Of A Debit Card

We’ve already mentioned some of the benefits of a debit card, such as no credit check and for prepaid cards, there is not required bank account. Here are a few more advantages that you get with a debit card.

• No extra fees. Since debit cards are either attached to your bank account or can be loaded at any time, you will not incur any penalty or overdraft fees since the money you are using is your own.
• You only spend what you have. Debit cards are great for budgeting because you will only spend the money that you have in there. Technically, there will be no going over the credit limit because if what you are paying for is more than what you have, the card simply will not work. It lessens the chances of you getting into debt because you only spend what is in your account.
• For prepaid debit cards, there is no required minimum balance to maintain your account. For debit cards associated with your bank account, all you need to do is keep the monthly maintaining balance and you are all set.
• Unlike most credit cards, debit cards require a PIN code before money can be deducted from your account. If your card is stolen, you have the satisfaction that the card cannot be used and it gives you time to cancel it.
• Debit cards are affiliated with brands like Visa and Mastercard, creating a wide network of merchants and establishments where these cards will be accepted both locally and internationally. Note that the amount deducted from your account will be subject to conversion rates if you use it abroad.

Debit cards also present their own disadvantages. Your debit card is associated with your savings, particularly if you have only one account. There is also the issue of liability. If your card is stolen or lost and used by the thief, you will still be liable for the costs incurred. If you are signing up for a debit card, ask if the bank offers a debit card protection service.

Knowing the difference between a credit card and a debit card helps you make your choice which one you should pick for your expenses. Debit cards can be used nearly everywhere that credit cards can, the difference being the amount of money that you can use. Weigh your options before signing up for one to avoid the hassle later on.

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