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Main differences between credit and debit cards

Posted by on Nov 30, 2016

Main differences between credit and debit cards

Both credit and debit cards are ideal for making payments without having to carry a cash book or even paper money. They can also be used for making purchases and reservations online or over the phone and for withdrawing cash from ATMs. However, even though they are similar at first, there are many differences between these two cards.
First of all, applying for a debit card is not difficult. All you need to do is open a bank account and require a debit card that will be connected to it. On the other hand, applying for a credit card requires you to have decent credit rating and it requires the card issuer to check your credit score and financial background before you are granted a card.

Pros and cons of credit cards

When you use a debit card, the card is connected to your checking or savings account. Whenever you make a purchase using a debit card, the money is immediately deducted from your bank account. On the other hand, paying by credit card is like using a credit or a loan and it is not connected to a bank account. Read more about pros and cons of credit cards.

The credit card issuer gives you the money ahead, and you are expected to repay the debt within a certain period of time (usually 30 days). If you do not do so, you are also charged an interest. Speaking of interest, none of it is charged when you pay by debit card, because there is no money borrowed. The amount you have on the bank account is available to you to spend by using a debit card.

Credit and debit cards security

When it comes to the aspect of security, it can be said that credit cards are more secure than debit cards. Firstly, credit cards are not considered safe because many of them still use the out-of-date technology. However, if something happens to the card, the users are not considered responsible, because it is not their fault the technology is bad. Secondly, the liability of the card owner in case of fraud is very low. If it happens that your credit card is stolen and the purchase was made through it, you are liable for a max amount of $50. With debit cards, it is different.

They are secure in a way because they have a PIN code, but the security lasts as long as the PIN or even only the card number is not stolen. When it comes to fraud liability, it is very high with debit cards. If your card is stolen and the purchase is made through it (or the money is withdrawn from an ATM), the money is withdrawn directly from your bank account and there is no way you can prove that it was not done by you.

The last aspect to consider is credit rating. When you use credit cards, considering that you always repay the debt on time and in full, it can affect the improvement of your credit rating. With debit cards, since there is no debt but the money is directly taken off your bank account, there is no such opportunity.