Debit Card vs Credit Card

Debit Card vs Credit Card

You may be wondering what the difference between a debit card and a credit card is, and there are quite a few differences. When you are looking at a debit card vs. credit card, you’ll notice that even though the look the same use them in a very different manner.

Debit Cards

Debit cards are linked to your bank account, usually a savings account order checking account, and money is debited (withdrawn) from the account as soon as the transaction occurs. You can only use your debit card as long as there is money in your account, which offers you a convenient way to pay for purchases as you don’t have to withdraw any cash.

Credit Cards

Credit cards on the other hand, are quite different. They offer a line of credit, almost like a loan, that is interest-free if the monthly credit card bill is paid on time. Instead of being connected to a personal bank account, a credit card is connected to the bank or financial institution that issued the card. So when you use a credit card, the issuer pays the merchant and you go into debt to the card issuer.

A credit card obviously carries a higher risk than a debit card as you basically are using money that you don’t really have. With a debit card you are using your own money that is already in your bank account, but with a credit card you are buying on credit that the bank has extended to you. The credit limit on your card will vary, as this will be based on your own credit profile as well as your income level. If you handle your credit card correctly and you make your monthly payments on time, you can request a credit limit increase after a few months.

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