The world of banking and finance requires good knowledge sometimes. You must know how operations work and what cards you should have and use.
Debit Cards and Credit Cards are both available and used by many people all around the world.
In this article, we will walk you through the differences between debit and credit cards. Their pros, cons, and how they work.
Differences Between Debit and Credit Cards: Main Differences
Debit Cards
- Debit Cards use money from your own bank account when you use it to buy or pay for something, so you are basically using your own money.
- There is no “Build Credit History” feature with Debit Cards.
- You will not be charged any interests when you use your debit card.
- If you have money in your own bank account, you will be able to buy stuff and pay using your debit card. If you do not have any money in your bank account, you cannot perform any purchase.
- When you use your debit card, you can be liable for any fraudulent purchases.
- There are fees included when you use your debit card like: ATM fees and PIN fees.
Credit Cards
- Credit Cards use money you do not have in your own bank account, it is like lending you money to buy or pay for anything and you will have to repay it later.
- There is “Build Credit History” feature when you use a credit card.
- Interest rates should be paid if you are late in giving the money you borrowed back.
- When you use your credit card, you can be limited for any fraudulent purchases.
- There are fees when you use your credit cards, like: late repayment fees and foreign transactions fees.
Differences Between Debit and Credit Cards: Overview
Debit Cards
Debit Cards are cards you use to pay for something or buy anything.
Instead of having cash on you, you can use your debit card, which simply deduct the amount you must pay from your own money that you have in your bank account.
This money is yours, so you do not have to pay it back.
There are 2 commonly known types of debit cards: Bank Debit Cards and Prepaid Cards.
Bank Credit Cards are always issued when you open your own bank account and it will be given to you by the bank. You use it to pay for anything and as we mentioned, the amount will be deducted from your own money that is available in the bank account.
Prepaid Cards are cards you can issue, charge certain amount of money in, and use while you travel or shop online. The card will not be working if the amount is low or finished so you will have to recharge it again to be able to use it.
Pros
- You will not lend money when you use your debit card, you will be using your own money.
- You can monitor the activity of your bank account through SMS service or the bank’s mobile application.
- You will not pay any purchase interests.
- Cash back points are a win when you use your debit card.
- You can use your debit card to withdraw or deposit money into your bank account through ATM machines.
Credit Cards
Credit Cards are cards you use to pay for or buy anything when you do not have the money available in your bank account.
It is simply like you are borrowing the money from the bank and you will have to give it back later as the money is not yours in the first place.
Pros
- Credit Cards help you have good credit history and credit score.
- You can enjoy cash back rewards when you use a credit card.
- Credit Cards are great when you have an emergency and you do not have any money in your account or on you.
In this article, we have walked you through the differences between debit and credit cards. We have listed their overviews, pros, and cons.
We hope you find all the details helpful in managing your finances now!
