Finance

The Main Differences Between a Credit And a Debit Card

By simply looking at them, both credit and debit cards look exactly the same, they have identical numbers, issue and expiration dates and name of the owner.

A fundamental difference between these two is that a credit card allows you to borrow some money (only up to a certain limit), and repay it later with some interest, while on the other hand, a debit card only allows you to use the funds you already have in your bank account.

While having either one, or both of them is perfectly fine, and provides you with many unique benefits, there certainly are some differences between these two that you’d have to learn in order to keep your finances organized.

Credit Card

A credit card can be issued by a financial institution, it lets you borrow some money up to a specific limit and repay it with a specific interest rate, which depends on the terms and conditions of the card issuer.

The owner of a credit card can benefit from its features by borrowing money and repaying it on time. This allows the owner to enjoy some perks and rewards that a debit card holder can’t access.

When using a credit card, you are given a specific score depending on your punctuality in making the repayments on time, and people with good credit scores can enjoy benefits like a lower interest rate.

Debit Card

Instead of a credit card, which allows you to borrow some money from the issuer, a debit card directly cuts the money from your bank account whenever a transaction is initiated.

If you’re using a debit card to make transactions lower than your bank balance, then you won’t have to pay any fees, but a hefty overdraft fee might be charged by the bank if you exceed your account limit in a transaction. Many experts suggest preferring debit cards over credit cards, because you’re only spending what you already have. Also you can transfer money from credit card to debit card by some set methods and use it to avoid higher interest rates.