Debit cards and credit cards have features that are similar to each other. Both types of cards will have major credit company logos like MasterCard or Visa, and you can use both to make any kind of purchase.

The main difference between a debit card and a credit card is the source of the money at the time of purchase.

• When you make a purchase with your debit card, the money will come straight from your checking account.
• When you use a credit card to buy something, the purchase gets charged to a revolving credit line that you pay later.

In some cases, your debit card might have some form of overdraft protection that is linked to your checking account in the event of accidental overspending.

A credit card will have a specific limit that you are allowed to spend and if you try to spend more than what is on the card, the purchase will be declined.

Debit Card

Debit cards look just like credit cards and in some cases, you can’t tell the difference between the two at all.

Here are some distinguishing features of a debit card:

A debit card will be issued by banks to their customers so they can make purchases against the money in their checking account without needing to take out cash or write a check.

You can use a debit card to make purchases almost anywhere. For example, if your debit card is a Visa, you can use it anywhere that accepts Visa payments. When you make a debit card purchase, the bank will deduct the purchase amount from your account balance.

You can also use a debit card to take money out of your checking account at an ATM with a PIN, which is also known as a personal identification number. You might also be asked to use this PIN when you make purchases over a certain dollar amount.

 

Credit Card

A credit card is a line of credit that you have access to based on your credit score and other factors determined by the credit card company.

Here are some distinguishing features of a credit card:

When you use your credit card, the purchases are charged to the credit card and you will receive a bill the following month. With most credit cards, you will have 30 days to pay off the full balance before you are charged interest on the outstanding balance.

Being able to get a credit card depends on your credit-worthiness. Credit cards also have varying limits. You could have a higher limit to spend, or you could have a lower limit. The amount of money you have access to will depend on your credit score and your income.

Interest rates on credit cards are known to be high. This is how credit card companies make their money. If you pay your balance in full each month, you won’t have to worry about paying interest on your purchases.

 

Which Is Better?

When it comes to which type of card you should use, you need to consider how you handle yourself when you have credit. For instance, if you have spending issues, you should use your debit card any chance you get to prevent yourself from getting into debt.

Choosing the right card also depends on what you are planning on purchasing. For example, a rental car agency or a hotel might require a credit card for you to book with them. They make it close to impossible to use a debit card, so in this case you would need a credit card.

Using a credit card might also benefit you if you are trying to take advantage of their rewards programs. However, this will only work if you are planning on paying off the balance every month. It is also a good idea to use a credit card if you are trying to build your credit for a home or vehicle purchase. As long as you are responsible, you will benefit.

There are some instances where you might want to use your debit card instead of a credit card. For example, using a credit card might result in additional fees, so it may not make sense for smaller charges. Using a debit card can help you avoid interest.

Another instance you would want to use a debit card instead of a credit card is when you are shopping at a small, local business. Businesses have to pay per transaction when a customer uses a credit card. These charges can quickly cut into profit margins of small stores.

If you are already in debt, it is probably a good idea to avoid using a credit card under any circumstance. There is no reason that you should put yourself further into debt. Using your debit card will help you to keep your finances and your budget on the right track to your financial goals.

Wrapping Up

If you are trying to decide whether you should use your debit card or your credit card for a purchase, it depends on your current situation. There are arguments for each type of card, just evaluate the impacts.

Image by Yulia Grigoryeva via Shutterstock.com