What’s the Difference Between a Debit and a Credit Card?

What’s the difference between a debit and a credit card?

Although both debit and credit cards are common financial tools used to make purchases, the differences between them and the potential impact to your finances may not be as clear.  Here, we will discuss the major differences between a debit and a credit card.

Debit Cards

Debit cards have replaced your old check book. For the rest of you, debit cards allow you to pay for purchases with money directly from your bank account.  Now, you can use your debit card and the money is similarly deducted in a few days, although you’ll likely see a pending transaction notice for your purchases.

Benefits of a Debit Card

Debit cards encourage you to spend within your means because funds are coming from an account with money you already have, there are some drawbacks to consider. Another drawback of debit cards is that they provide limited fraud protection.

Credit Cards

Credit cards allow you to make purchases with money that you may or may not have. With credit cards you’re in debt every day you have a balance. Another way to think about it is that you are racking up small loans throughout the month with each purchase. 

Benefits of Credit Card

First, credit cards offer some pretty nice reward opportunities if you’re able to use them responsibly. Another major positive to using credit cards is that they carry excellent fraud protection. Responsible credit card use allows users to build credit by proving that they can keep their credit usage low and make their payments on time.

Which Card is Right for You?

No matter which type of card you use, it will be important for you to track your spending so that you know where you stand at all times. You don’t want to be hit with overdraft fees on your debit card, nor do you want to get into a situation where you can’t pay your credit card balances and be forced to pay interest.

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