Credit Cards vs Debit Cards: What is the Difference?
Do you believe in credit cards, what about debit cards? Meanwhile, they both have their unique difference and purpose. So, we will be looking at credit cards vs debit cards on this page.
Do you know that credit cards and debit cards could look the same? For instance, you will find features like expiration dates, 16-digit card numbers, EMV chips, and strips, on their body. Again, both of them are good for making day-to-day purchases in stores or online. Guess what? They have different notions attached to the usage. Read on as we unveil the key difference between credit cards and debit cards.
What is a credit card?
In defining what a credit card is, we must be realistic about it. Thus, a credit card is a card that permits anyone with it to borrow funds. Thus, financial institution issues it. In other words, cardholders go in agreement with the institution to borrow money. This time around, the card grants you access to the money you request.
Credit cards have different categories and they are as follows:
- Standard cards: This kind borrows their users on the ground of making purchases, balance transfers, or cash advances with no annual fee
- Premium cards: This kind unlocks airport lounge access, special event access, concierge services, and more but, it has higher annual fees
- Rewards cards: Unlocks cash back, travel point on distance, benefits on customers purchases
- Balance transfer cards: This kind have low introductory interest rates plus low fees on balance transfers from another credit card
- Secured Credit cards: This kind needs an initial cash deposit from the cardholder as collateral
- Charge cards: there is no limit to what you can spend with this card but never permits you to carry over the unpaid balance to a new month
However, you can see that credit cards cover a lot you can barely not need.
Benefits of Credit Cards
- Helps you build a credit history. However, your credit card use reflects in your credit report. Thus, it could be positive or negative due to late payments and delinquencies.
- Presence of warranty and purchase protections. Here is an opportunity to get a warranty on purchases you make with your credit card
These and more are the benefits you will receive with a credit card.
Debit card – what is a Debit Card
A debit card is a payment card that issues payments by deducting money from your checking account. Thus, this is not like a credit card that borrows your money from a bank. Rather, you can only withdraw what you have in your account. That is to say, when your account balance is zero, you cannot withdraw money.
However, the major issuers of debit cards are visa and MasterCard. Also, there are two types of debit cards that will not require you to have a checking account or savings account. They are Prepaid debit cards, and Electronic benefits transfer (EBT).
Benefits of using Debit cards
- With a debit card, you can stay away from debt. Thus, you cannot borrow with your debit card even if you have a balance.
- There is no annual fee, as well as on withdrawals.
- Enough protections apply to debit cards particularly those from VISA OR MasterCard.
But, the sad thing here is that it has no rewards or won’t build your credit score.