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The Difference Between Credit Cards and Debit Cards

The Difference Between Credit Cards and Debit Cards

September 14, 2016
credit cards and debit cards
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Credit cards and debit cards are both important financial tools that can make our lives a lot easier. Although they might sound the same, they are accepted at the same places and they can both be used anywhere, there are a lot of differences between them. Understanding these differences can help us make better financial decisions.

The main difference between the two is the fact that a debit card takes money from your banking account, while a credit card will charge everything to your line of credit. When you make a purchase with a debit card, you pay directly with your own money. The amount is taken from your checking account and transferred to the merchant’s account, after the merchant sends in the transaction to their bank. This process can take a few days. During this time, the amount of money is still present in your account, held there until the transaction goes through. That’s why it’s important to be careful and make sure that you don’t accidentally overdraw your account. This is possible with a debit card.

Meanwhile, a credit card will allow you to borrow money in small amounts that you can use to buy different items. It’s important to note that this is not your money. And, as a result, it comes with interest. However, there’s a grace period of about 30 days before your credit card company charges you interest for your purchases. If you pay what you owe within that grace period, you won’t have to worry about carrying a balance over from month to month.

Debit vs. Credit

So which one of the two is better? Finding the answer to this question is not an easy task, as each one comes with its own benefits.

A debit card can help you become more financially responsible, as it only allows you to use the money that you have. It’s relatively easy to get one and it comes with no monthly bills or interest. Debit cards also feature PINs, which make them secure, at least so long as no one steals the card and its information.

But here’s where the downside comes in. If someone does steal your debit card and its PIN, they can take all the money that you have in that particular account. Investigating this damage takes time and you might not be able to recover what you lost.

Although they are harder to get than a debit card, they’re not as safe and they do come with monthly bills and interest, credit cards still have a lot to offer. If they get stolen, then the owner is rarely held liable, losing only $50, at most. And you can also avoid paying interest if you’re responsible. But probably the most important benefit that comes with credit cards is the fact that they help you build credit history, which, in the United States, is extremely important. Debit cards can’t help you with this.

It’s all up to you

Credit cards and debit cards both have their good sides and bad sides. It’s up to you to decide which one is right for you. One thing you can be sure of. If you use them wisely, then you will only stand to gain.

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