Debit and Credit Card – What Is the Difference and what should you choose?

Are Debit and Credit cards the same?

While there are certain similarities when it comes to both Debit and Credit cards, they are fundamentally different types of cards. Perhaps the biggest similarity between them is that you can use them to make payments but the underlying principles are totally different. With Debit Cards, you pay for transactions from the balance in your account while you use your line of credit with Credit Cards.

What is the difference between Account Balance and Line of Credit?

Debit cards operate on your account balance. This means the card is directly linked to your savings account or an account with funds in them. If you do not have sufficient funds in that account, then the transaction will not succeed. On the other hand, Credit Cards operate along a Line of Credit where a certain amount is allocated to you by the issuer. You can use that amount until it maxes out and then you will not be able to use it anymore.

How do I choose which card to use?

To choose which card is the best for you, consider the following:

  • Convenience – Basically, you can use either one of the cards if you are going to make payments. With the cards, you do not necessarily need to carry cash.
  • Cash management – Both cards are great options to help you manage your expenses. However, if you are poor with cash management, a Debit card will be your best choice.
  • Fraud protection – Credit cards have been protected against fraud. You will have a hotline number to call if you notice any unusual activities with your credit card. Debit cards are less secure as once the funds are spent (if the card is stolen), there is no dispute.
  • Overspending – Credit cards do have some provisions for overspending if required. You can increase your line of credit if needed like if you are traveling overseas or if you need to make a big payment. You do not have this facility with debit cards.
  • Rewards and cashback – Credit card companies encourage you to spend more using their facilities by giving you rewards and cash back programs. While some banks do provide this with Debit cards, they are usually less attractive.
  • Emergencies – Credit cards are most useful for emergencies. That is why a lot of consumers tend to have 1 credit card which they keep for these last-minute purchases or expenditures.
  • Withdrawal – You can use your debit card to make ATM withdrawals with standard or no fees. However, the withdrawal on credit cards is way more expensive.
  • Your spending appetite – If you are one who likes to shop and can at times not able to control your behavior, having a debit card might be a better option as you spend within your means. A credit card will be best used for necessary expenses.

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