Debit cards and Credit cards allow more than just a mode to access money without having the need to carry around cash or an additional checkbook. Debit cards play the role of being the digitalized versions of checkbook and are linked to your bank account from where money can be withdrawn at any given point as soon as a transaction occurs.
Credit cards are quite different from this; they offer a line of credit i.e. a loan which is interest-free in the monthly due is cleared from time to time. Debit cards can conveniently be used to withdraw cash from ATMs. A debit card holder can avail the benefits of making purchases by using his/her card, provided he/she has funds in the account.
Difference between a Debit Card and Credit Card
Debit cards are primarily used to purchase goods and to withdraw money at cash machines. The money is automatically withdrawn from your current account when you swipe your card, so you must have enough balance in your account or an agreed overdraft to back the transaction. On the other hand, a credit card isn’t linked to your account, it is a credit facility provided that enables you to purchase things immediately up to a pre-decided limit, and pay back at a later date. Besides this, credit cards also come with a lot of additional benefits in the form of special discounts and warranties, such as cash back option, frequent flyer miles, etc.
It can be tough to decide when to use a credit or a debit card. But if you seem to be someone who has spending issues, the wisest option is to use a debit card whenever possible, since this will prevent you from accidentally falling into the trap of credit card. It also depends from situation to situation with regard to purchases, some hotels or rental products service provider may still prefer you to swipe your credit card over debit card since they can charge you a penalty for any damages caused to their property.
Some may argue that using a credit card is a viable option to reap benefits from the reward programs. This applies if you pay off the balance from time to time. However, if consistency is not followed with respect to payments, these rewards would turn into interests for whatever you save. One final advantage of using a credit card is that they are helpful for consumers seeking to establish a good credit history. Disciplined credit card usage can help one to improve their credit rating, which improves your chances of obtaining favorable credit terms (low fees or less interest rate) on personal loans, vehicle loans, etc. At the same time, if you’re an avid card user, ensure reviewing your statements periodically to make sure that you can identify all charges. That way, you could get any fraudulent charges refunded directly. Finally, your debit card is not just a card – it’s an instant access to your money. Be equally careful with it as you would be with your wallet if it contained the contents of your bank account.