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Consumer's Guide to Debit Card vs. Credit Card

by Alice C. Woodhouse
May 13, 2009
Don't get confused on Debit and Credit, because it all boils down to one thing: Debit ¬"Pay Now¬" Cards, or Credit ¬"Pay Later¬" Cards. pay later? Of course the difference is obvious, and it sounds really simple, . It might seem like a simple question to you, but the difference is staggering when it comes to the very business of swiping these plastics.

Here's a little more insight into the world of Debit and Credit cards. First, the difference in the two are the nature of the source of funds. Credit card funds is the money you borrow from a bank charged with interest until you pay it off. Debit card funds is the money that you have placed in an account in a bank. So, with that in mind, here are some more distinctions that can help you determine which is more applicable for you.

Credit cards have long been the favorite of those who can't afford to pay with cash as of the moment, and thus ¬"borrow¬" money to pay for basic products and services, like grocery, paying the rent, shopping, eating out, etc. Credit cards are extremely convenient, but it could just as easily get out of hand. Nowadays, we read in the newspapers or see on television how people can get so greedy and so crazy at swiping their plastics without even thinking that they actually have to pay for those things that they purchased eventually. Because of this, debit comes into the picture.

There are many finance professionals and finance advisors that can see the benefits of using Debit cards and recommend it as a way to control spending. Debit cards work exactly like a credit card in terms of working when you purchase items or pay for services. You can withdraw cash from your debit card as well. So the main difference is that it's your money your spending, and you don't owe anyone money, too! Finance professionals like the debit cards because, face it, charging on your own money for your purchases will help you not get overboard, plus, using a debit card requires absolute discipline if you don't want to end up with a $0 bank balance. What's good with debit is that it helps those who can't control themselves and spend more than they can afford, because the money should actually be inside your own account first.

Credit cards are only good if you are absolutely conscious of the total bill of your purchase, the interests and the fees that entail with one swipe of the card. That's why for those who are not plagued with debt, those who pay full each month, debit doesn't have a particular advantage over credit cards. With credit cards, you can have 30-40 days of 'free float' time period before money is withdrawn from the account. Compared to Credit, Debit cards have higher and a lot more overdraft fees. Credit card has a low risk for fraudulent use, since with credit card, customers can just refuse to pay for the purchases that have been made fraudulently. But in the case of Debit cards, the money exits your bank account immediately, and its a pain to have to alarm the bank and wait for a long time to get the money replaced. Credit card customers also enjoy safer transaction without having to input a sensitive pin number in every store that they buy from, and the rewards programs of credit card companies range from frequent flier rewards, freebies, cash rebates and more.

Credit cards are extremely useful but it very much depends on your discipline and spending habits. So if you're the type that pays off the full or minimum balance before the due date and avoid extra charges and fees, then you can reap the benefits that credit cards offer. But all in all, Debit cards have a higher advantage when it comes to staying away from unnecessary purchases and overspending, as debit can only be used if there is enough money in your account.

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Consumer's Guide to Debit Card vs. Credit Card



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