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!
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
