Credit Card Debt

Debit Vs. Credit: What is better?

Debit Vs. Credi

Debit VS. Credit: Which is better? The great debate

A Plastic payment card is probably the most convenient method of carrying money. Be it a credit or a debit card, they’re there to make life easier for you and lighten up that wallet. You have money with you at all times without actually carrying cash around. Questions regarding the differences between the two and the superiority of one over the other rage on.

Using a credit card is essentially like taking a loan from a Credit Card Company. When you use a credit card, you borrow the money you don’t have and then promise to return it by the end of the month when you receive the credit card bill.

A debit card, on the other hand, is associated directly with your bank or checking account. It draws on existing funds that you may have deposited in your account.

These credit and debit cards look the same, work almost the same way but are very different. Here is how:

Credit Card: Borrows money from a financial institution or a bank against an existing line of credit. You spend someone else’s money.

Debit Card: When used, a debit card spends the funds available in your checking account. You spend your own earned money without a line of credit.

Credit Card: Carries an interest charge. If the amount owed is not returned in full, within a given time period then a specified interest is charged on the remaining or outstanding balance and interest rates can sometimes be sky high.

Debit Card: The consumer’s own funds are being used to make transactions here there is no interest charged because in actuality no money is being borrowed.

Credit Card: The limit on your credit card can be increased or decreased depending on your credit and payment history. You can apply to have it changed at any given time.

Debit Card: The limit of your debit card equals your account limit.

Credit Card: They offer more protection in terms of having strict laws for fraud liability. You are not liable for fraudulent purchases, products that were never delivered or products that were damaged under the Fair Credit Billing Act. And if you are liable, the consumer liability limit is for $50 if notified within 60 days, in writing, since the fraudulent charges.

Debit Card: If making a purchase with a debit card the Electronic Transfer Act does provide some protection in case of a dispute or error but only if notified within two days, in written, does the liability limit remain at $50. Between two to six days the liability could increase from $50 to $500. After six days you could end up with no coverage at all.

Credit Card: Some credit card companies allow you to overdraw an overcharge on your maximum credit limit for a small fee.

Debit Cards: There may be very high ‘overdraft’ fees if you go over your account limit.

While credit cards provide more benefits and rewards in terms of warranties on newly purchased products or travel miles or insurances on hotel and car rentals, debit cards can help you avoid falling into the credit card trap of interest rates and mountains of debt. If you are responsible with your money and spending and don’t like to get carried away then you can choose either card and the differences won’t matter.

About the author

Willie DeJarnette

Just wanted to provide some basic knowledge of credit cards, credit score, and other credit types financial resources. Always trying to provide an understanding how to use credit cards and basically staying away from financial ruins.

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