Are you wondering about what could be the difference between a debit card and a credit card? Debit cards and credit cards both offer a convenient way to pay without cash or checks.
The major difference between a credit card and a debit card is where the money comes from. A debit card takes it from your banking account, and a credit card charges it to your credit line.
Credit cards and debit cards are almost identical sometimes people mistake each card, both cards have 16-digit card numbers, expiration dates, and magnetic strips.
In this post, let’s discuss the difference between a debit card and a credit card
What Is a Debit Card?
A debit card allows you to withdraw funds directly from your checking/savings account using an ATM machine or get cash advances when making purchases. Debit cards are usually issued by banks or credit unions with a PIN that enables you to withdraw money from any ATM.
Also Read: How to Activate Netspend Card 2022
What Is a Credit Card?
A credit card is a type of card that allows users to borrow money to purchase goods and pay for services against a line of credit, otherwise known as the card’s credit limit. Usually, a credit card comes with an interest fee, If the payment is late, the credit card company may also charge late fees and revoke promotional interest rates. You can also get rewards and discounts for using a credit card.
Credit cards are issued in the following variety of categories
- Standard cards simply extend a line of credit to their users for making purchases, balance transfers, and/or cash advances, and they often have no annual fee.
- Premium cards offer perks such as concierge services, airport lounge access, special event access, and more, but they usually have higher annual fees.
- Rewards cards offer cash back, travel points, or other benefits to customers based on how they spend.
- Balance transfer cards have low introductory interest rates and fees on balance transfers from another credit card.
- Secured credit cards require an initial cash deposit that is held by the issuer as collateral.
- Charge cards have no preset spending limit but often don’t allow unpaid balances to carry over from month to month.
Debit Cards vs. Credit Cards
These are the major difference between a debit card and a credit card
|Parameters||Debit Card||Credit Card|
|Source of funds||Your savings bank account or current account.||Credit line|
|Spending advantage||You can only spend how much you have.||Can spend more than what you have.|
|Who pays for the purchase?||You pay for your purchase.||The credit card company pays the vendor for your purchase. You pay the credit card company.|
|Definition||Deducts money directly from your savings bank account or your current account.||Allows you to borrow funds to pay for goods and services.|
|Bill||You pay for your purchase.||The credit card company pays the vendor for your purchase. You pay the credit card company|
|Fees and charges||Annual fees and PIN regeneration fees are applicable||Credit cards have multiple fees applicable. These include joining fees, annual fees, late payment fees, and bounced cheque fees among others.|
|Interest||There is no interest that is charged.||Interest is charged on the outstanding amount if it hasn’t been paid by the due date.|
|Rewards||Typically, the rewards you get are minimal||Get to enjoy cash back, air miles, and reward points that can be redeemed.|
There are basic steps one must take in other to ensure safety against fraud, especially with your credit or debit card. Credit on the other hand has greater fraud protection than debit cards. Financial institutions always provide fraud protection policies in other to secure your details and protect you from fraud. but you also have to even protect your details as well because security begins with you.
4 Ways to Protect Your credit/debit card from Fraud
- Always guard your online information
- Monitor your cards
- Check your credit report
- Report suspicious activity
Pros and Cons of Debit Cards and Credit Cards
Now that you know the fundamental ways in which debit cards differ from credit cards, let’s look at their pros and cons.
The difference between a debit card and a credit card is their functionality. Both cards share almost the same feature like the 16-digit card numbers, expiration dates, magnetic strips, and even shapes. A credit card allows you to borrow money that you are eligible for and can pay back with interest. While debit card on the other hand only allows you to withdraw funds that are available in your checking or savings account.
The answer is NO. Both cards may look alike but serve a different purpose. A debit card is used to withdraw money from your account
A credit card is used to borrow money against a line of credit
It is best to use your credit card at least once every three money to keep it active. But if you want to improve your credit score you should use it often.
Credit cards allow you to borrow funds against your line of credit while debit allows you to use the funds that are available in your bank account. You should choose what best suits the situation
Oh YES credit card offers more security protection compared to debit cards
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