September 19, 2013
What are some of the differences between a debit card and a credit card? Does one provide more protection than the other?
What are some of the differences between a debit card and a credit card? Does one provide more protection than the other?
There are some distinct differences between credit cards and debit cards. A debit card is basically like using cash because it comes right out of your checking account. There is no monthly bill that comes to you at the end of the month because the transaction is complete right when you use your debit card. A credit card is where you buy something NOW and pay for it later. Sometimes this is used wisely like paying it off completely at the end of every month. However there are cases where it will turn around and bit you in the but with interest if you choose to pay the minimum balance each month or not pay it at all. A credit card when used wisely offers some good protection because if you see there is foreign activity on your account–money YOU didn’t spend– they will take care of it with no care to you. Since you haven’t spent your money paying the bill yet– you are not responsible for the charges. Debit cards its a little harder to get back the money that has already came out of YOUR checking account.
Well said, Macala. You covered the point quite well. Let’s add a few more points. Most credit cards offer double the warranty on a particular purchase, price matching (if you find an item cheaper you can get reimbursed), theft/damage/fire protection, business protection (if they won’t take back a defective purchase you can usually get the credit card company to cover the cost), and finally, rental car insurance (covers the deductible at no cost).
Just as Macala stated, all of those benefits are good ONLY if you pay the bill at the end of each month. If you cannot do that, DO NOT use a credit card. On the other hand, wise and prudent use can easily provide you protection and convenience as you live your daily life. It comes down to YOU and how organized and disciplined you are with your money. TAKE CONTROL!
In addition to what was said already, some credit cards give you incentives to use them. For example, some will offer 5% cash back for using them at certain locations like gas stations or grocery stores. Some give 1% cash back on everything you spent. Some card offer frequent flyer miles, etc. I like the cash back incentives because they are more straight forward. I’ve used my cash back money to get gift cards for friends and families, and for things that I might want, but not necessarily need. Although it’s already stated, it’s worth repeating, always pay off your balance, because the interest rates on the credit cards are ridiculous. My credit card also have an option to set the limit alert at any level I want, not the maximum that the credit card company give you. For example, the card company can give you a $2000 limit, but you know that you can only spend $500 for the month, you can set it at $500. If you haven’t establish a line of credit, or have bad credit, you might be limited to a debit card. It’s still a good start. I used to work with a woman who had a debit card number stolen from her. Her bank actually notified her before she was even aware of the theft. She was not responsible for the fraudulent charges. With that said, I prefer using my credit card for purchases because of the cash backs and the added protections that I get with my purchases.
Great follow-up comments, Rene! Welcome to OUR place. The place where we share what we have learned about that thing called money.