Credit Card vs. Debit Card: Which is better?

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Difference between Credit Card and Debit Card

With the economic climate being in a less-than-favorable state, more and more people are looking into the benefits offered by credit cards and debit cards. For many people, such cards can be tremendously useful and handy in cases of emergency or when the use of cash is difficult, impossible or impractical. While they may appear to be the same and in fact allow you to make purchases and payments even without cash on you, they do have a number of differences that are worth looking into. Let's check them out!

Credit Card
Debit Card

Costs

Initially, debit cards may seem to offer a far better deal than credit cards, since there are fewer fees and miscellaneous charges involved at the outset. In fact, most debit cards will only charge you a POS or Point-Of-Sale fee whenever you use your card for a purchase. Nevertheless, there are a few more factors to consider other than the initial cost. For one thing, many credit card companies offer discounts and even interest-free loans, both of which can save you a lot of money in the long run.

You should also be aware that both credit cards and debit cards can be "blocked". This is a situation wherein the retailer "freezes" a certain amount of money in your account in order to cover your potential purchase. If your actual purchase amount is lower than the amount they have frozen, your funds could be tied up for several days. This may cause you to incur overdraft fees.

Risk Protection

The actual level of protection that you get is greatly dependent on the credit card or debit card company in question. As mentioned previously, both cards can be blocked, which can tie up your money and open you to the risk of overdraft charges. Nevertheless, a debit card has a distinct disadvantage on this score, as even a small purchase can result in an overdraft.

Accessibility

Credit cards are the far better choices as far as accessibility and flexibility are concerned. A greater number of establishments are willing to accept them and most online retailers that sell merchandise on an installment plan view them as the only acceptable indication of your willingness to pay. That being said, more and more places accept debit cards nowadays and they could potentially be used in many places that accept credit cards.

Summary

Credit card

  • Initially more costs
  • Many cards offer interest free loans
  • Cards can blocked by certain retailers
  • Blocked cards can tie up your money resulting in bounced checks or overdraft charges
  • Implies a greater degree of responsibility, which is a plus for certain retailers

Debit card

  • Generally lower fees
  • Many also be blocked by retailers, resulting in pretty much the same issues as with credit cards
  • Can be blocked just as often as credit cards
  • Possible risk of bounced checks and overdraft charges
  • More risk of losing money from fraud
  • Accepted at fewer establishments

Which one do you use most often?
  • Credit Card
  • Debit Card
 
 

Discuss It: comments 2

  • Guest
  • Lisa wrote on May 2010

You can use Credit card as debit card. You need to remember pin to use debit card. I prefer Credit card but payoff end of the month. This way I can improve my credit rating and also get some points/cash from credit cards.

  • Guest
  • QuickLoan wrote on December 2012

Both are equally important according to the need, requirement, risk and flexibility. Both are easily accessible and can be properly managed. The risk factor with these cards at the time of lost or stolen is quite main, as both the cards can be blocked but with the credit cards it a bit dangerous; as there’s no pin codes as debit cards and can be easily accessible if not blocked at the earliest.

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