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Credit Cards Or Debit Cards - What's The Difference?

It was so long ago that there were distinct differences between credit cards and debit cards. This was largely due to the smaller numbers of banks that were regularly offering debit cards. Credit cards were in a league of their own, but not without consequences. As more consumers applied for credit lines the more misuse began to characterize the whole industry. Many people were left with enormous debts because by using credit they were using money they didn't really have.

Debit cards gradually caught on these same consumers were attempting to resolve their credit debt by living more within their means and using money that they actually had in their checking accounts. Debit cards or check cards as they're also called, function in basically the same way as credit cards meaning that you could make purchases but instead of drawing from an independent credit line, the card user would draw from the balance of their bank account, meaning they could only use the money they had and no more.

Debit differed from credit because you could also use them like ATM cards. Cash could be readily withdrawn or the card could be used at the counter to make purchases. This remained a firm distinction between credit and debit for a short time only. Credit card issuers saw the opportunity to close this gap and regain some of the market. This was accomplished by adding features to their cards including the ability to use them at ATMs to make cash withdrawals or cash advances.

Many companies eventually issued debit cards that could be used at places where credit was once accepted exclusively. The lines began to blur between the two card types. Banks and other financial institutions began issuing debit cards that were associated with the major credit card companies allowing them to have wider usage.

The differences between the two cards revolve around specifics of policy and matters of interest rate. Credit cards still attached interest to each purchase where debit cards generally do not have an interest attached because the money you are using does not belong to a lending company but you, the consumer. Of course, there are some advantages and disadvantages to both cards.

With credit cards the primary advantage is still having access to money that you would not have otherwise in order to make purchase or deal with emergency situations. You have funds when you need them. Again the real problem with a credit card is misusing them and creating a major debt through overuse.

Debit cards are good because you use money that is in your account and when it is used you do not have to pay it back. With a debit card, you do not have to worry about accruing serious debt - or not payments, interest rates, or finance charges. The debit car is an alternative to carrying cash and it offers more security since they will only work with a PIN number. The clear disadvantage is that you must have the money in your account to use it.

Both debit and credit can be useful tools, both convenient, yet both have clear advantages and disadvantages depending upon your circumstances. If you can make reasonable use of a credit card, it can be great option to have available if an unexpected financial situation should arise. Debits give you access to your own money and keep you more responsible for properly using your finances.

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