Finance Debit Cards

Debit card versus Credit Card

Published at 01/12/2012 20:15:12


In most of the cases people are oblivious to the benefits a debit card has over a traditional credit card. Due to this reason, they also fail to reap the benefits of using a debit card. People also find it hard to point out the exact difference between a debit card and a credit card. To know more about these cards, read on!

Key Differences

There are a lot of differences between a debit card and a credit card. For instance using a credit card means that you are borrowing a bank or other financial institutions money and using it as your own. The financial institution pays on behalf of the credit holder and then takes the money from the card holder at a later date. Therefore, using a credit is basically a debt taken by the credit card holder. Apart from the amount used, the credit card holder should also pay interest on the total amount payable to financial institution.

Conversely, the debit card is when the card holder uses money from their own bank account. Apart from this, the card holder also has the option to withdraw money in their bank accounts from an ATM (Automated Teller Machine) located nearby. This ensures that the card holder only uses the money that they have available in their bank account rather than splurging money by incurring huge amount of interests.

Which one is better?

Choosing between the two cards pretty much depends on the individual user. For instance, you are relatively cautious about using your card then the credit card may be good option for you. Conversely, if you tend to splurge using a credit card and get shocked seeing your bill, then using a debit card may be a better option. However, debit cards also have their fair share of risks. For instance, you do not need to show any photo ID or PIN for using a debit card which means that the debit card can be used by anyone. Therefore, losing a debit card can be quite expensive. Apart from this, if you find any suspicious charges on the credit card statement then you can report it immediately and will be subject to a limited consumer fraud charge of $50. However, in the case of a debit card fraud the liability may go to as high as $500. No matter which card you use, make sure that you report any fraudulent activities on your card as soon as possible. Otherwise, the charges on the fraudulent activity may keep increasing. 

Tips and comments

Despite, the risks of fraudulent activities, debit card is easier to use and incurs lower interests and other charges compared to a credit card. Apart from this, it also ensures that you limit your expenses to the amount of money you already have rather than spending more money than you can repay in a credit card. Therefore, if you want to avoid high levels of interest then using a mere debit card should be your choice over a credit card.