Originally Posted On: https://www.news9.com/story/41132310/debit-card-vs-credit-card-which-card-should-you-use
At first glance, you might think credit and debit cards are the same. After all, they look pretty much identical with a 16-digit number, your full name, and expiration date. When actually credit and debit cards are totally different.
Keep reading to learn more about the difference between a debit card vs credit card.
Aside from both of these types of cards looking pretty similar, their functions are totally different. Debit cards let bank customers spend money that comes directly from the funds they have deposited into their checking account.
While credit cards, let customers borrow money from a credit card company up to a certain limit. It’s likely you have both one debit card and one credit card in your wallet. Here’s more about what makes these pieces of plastic different.
Credit cards come from a financial institution, such as a bank, that lets the cardholder borrow funds. When you sign up for a credit card, you are agreeing to pay that money back with interest and whatever other terms the institution outlines.
There are four different categories of credit cards:
These cards extend a line of credit to cardholders, that’s all.
A reward credit card can offer travel points, cashback, and other benefits and perks for their customers.
These cards require you to deposit cash upfront before you use them. This cash is held by the issuer as collateral.
Charge cards don’t have any spending limit that is preset. However, these cards usually don’t allow your unpaid balances to carry over from one month to the next.
If you’re still unsure of what kind of credit card make the most sense for you, check out this round-up of the best credit cards.
Debit cards, on the other hand, make payments by directly deducting money from your checking account, instead of a loan from a bank. These cards have the convenience of credit cards with the same consumer protection of major payment processors like MasterCard or Visa.
There are two types of debit cards you can get.
As the name promises, these cards simply draw money from your bank account to use for purchases.
These cards are issued to users by federal agencies and the state. EBT cards allow for users that qualify to use their benefits, such as unemployment, to make purchases.
These debit cards make the most sense for people without access to a bank account. These cards let users make electronic purchases up to the amount that is preloaded on to the card.
Now that you understand the difference between a debit card vs credit card, fund the card that makes the most sense for you. Remember, debit cards come directly from your bank account, while credit cards are more of a loan. For more financial tips and resources, check out our blog.
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