Credit Cards And Debit Cards - What's The Difference?

Debit card and credit card both look same. Both are issued by same companies but have are certain significant points that differentiate them. When you purchase an item with your credit card you will be paying with the money of the card issuer which you will have to repay later on a certain date, where as when you pay with a debit card you are actually using your own money deposited in the bank account. This single point can be critical point of your decision to either get credit card or a debit card.

Credit Cards:

Credit cards bring you easy credit line, flexible and accessible money on demand which you can use to purchase anything and then later pay fully or partially to the bank before the due date. Each credit card come with a set spending limits which you should not exceed or you will be subject to heavy penalties and interest fees. Normally, those customers who pay their credit card balance on time do not have to pay any interest but those who delay the payment have to repay the whole balance with additional interest rate and credit card charges. Using a credit card does not mean you don?t have to pay for the item. It only means that you will have to pay late for your purchase or can buy items even if you dot have full amount to pay at the time of purchase.

Debit Cards:

Debit cards are actually cards attached to your checking account. It is also possible to link your debit card to other account like mutual funds or saving accounts. Debit cards are also called ATM cards and one can easily withdraw funds through an ATM using a debit cards. Debit cards are too issued by same bank which issue credit cards but unlike credit card where you don't have to deposit funds early on in debit cards you will have to load balance in your checking account before you can use it for purchasing items. Debit cards are like paperless checks. The card issuer does not extend your credit line in debit cards. You only can use the exact amount that is in your account and once the account is exhausted you cannot use your debit card for further purchasing.

Other features:

Debit cards can only be used with a PIN number which makes them more secure than credit cards, but in recent times major credit cards companies have issued credit cards with PIN too and in Europe including UK a PIN is required to be used with a credit card.

Debit Cards instantly reduce the amount in your checking account whereas credit cards allow you to purchase at no interest up to the grace period.

As your debit card is linked with your checking account your account is debited straight away with a debit card and you cannot withhold the payment. But in credit card you can chargeback the seller or dispute the items unless the issue is not settled.

You don't pay any interest with a debit card, whereas in credit card if you cannot repay within the grace period then you will be subject to high interest fee and credit card charges.

Cardholders who pay using debit card have stricter spending discipline whereas credit card holders are more tempted to spend the amount on their card.

You can only learn which one is better for you from your experience using both credit cards. Only when you use the card you will be able to determine which one is good for you and which one dents your budget.

Financial products such as credit cards and debit cards are not always straightforward. Seeking financial advice from a professional is a good way to keep your finances in good shape.