Credit Card Debit Card : The Differences

By: EconomyWatch Content Team   Date: 22 January 2010

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Many consumers are turning to both the credit card & debit card for purchases and each has their own reasons for doing so. But the two are not the same, so while they may be similar it is important to know the difference. Which is better? The answer to that depends on what you need in a card.

One of the premier differences with a credit card & debit card is where the money comes from. When you use your credit card the company is loaning you money to pay for that purchase. At a later date they send you a bill. But a debit card is paid for almost immediately since the card is linked to your bank account. This means that the money comes directly from your account and you don’t have to worry about a bill later. Of course if you don’t immediately have the cash funds to pay for a purchase, this makes the debit card a bigger disadvantage.

Another big difference in a credit card & debit card is the ability to carry a balance. A credit card will allow you to continue charging things on your card until you reach your credit limit, at that point you cannot use it until you pay off some of that balance. But you can keep the balance if you are willing to pay the finance charges from interest.

Since a debit card is taking the money from your bank account immediately, you cannot carry a balance and you must be sure that you have the money available. A big advantage that a debit card offers in this instance is that credit cards often charge you annual fees and high interest rates to use their money but a debit card won’t.

Perhaps the last notable difference between the two cards is your protection in fraud situations. If your account number for a credit card is stolen then you can put a hold on the card within a few seconds to prevent any further damage to your card. Then the card will investigate the fraudulent charges and refund you the money if they find in your favor. But a debit card cannot be put on hold that way since you often have to go close the associated bank account first, and this gives a thief time to completely wipe out your funds.


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