Credit Card vs. Debit Card

For someone applying for his/her first credit card, the process can be somewhat confusing due to the high number of options. You may hear terms like “Prepaid, Secured, Student, and Low APR Credit Cards,” and while some of these are self-explanatory, others will have you reaching for the dictionary. Our site is designed to help you understand financial terms in order to help you select the card perfect for you. This article however serves a simpler purpose: to answer the most common question I get “What is the difference between a credit card and debit card?”

A debit card is issued by your bank and tied in with your checking account. Every time you use your debit card, the money will be automatically withdrawn from your checking account. The advantage of a debit card is that it helps you keep track of your spending. It’s a cash card and the cash will disappear instantly from you account instead of being credited on your bill 30 days later. This helps take away from the mindset of “free money” and spending more than what you have. A debit card can also easily be used at ATMs to withdraw money from your checking account.

Although credit cards are to blame for much of our frivolous spending, they do have their advantages. For example, if your credit card is stolen, the money cannot be taken out right away. So, by the time the thief is able to do some spending, you can contact your credit card’s theft department and report the card stolen. Most banks handle theft well and do not charge you for the items been purchased after the card was stolen. Credit cards also help you build credit, that is if you use them responsibly and pay your bills on time. And best of all, many credit cards offer rewards or a point system that you can use toward airline tickets, vacations, electronics, and even Starbucks!

It’s your decision which card is better for you. If you have the financial mentality “only spend what you have,” a debit card may work best for you. If you have larger expenses that you cannot afford at time of purchase, a credit card may be for you. Although, we mentioned debit cards often help people become a bit more financially responsible, there is no reason those with credit cards can’t hold themselves to the same esteem. Especially, now that every major credit card company allows you to access and track your account online at any time. By tracking your account, you can avoid spending more than you have while still taking advantage of the additional security and rewards.

To learn more about credit cards and all things relevant to credit, please visit Credit Card Details.