Difference Between Credit Cards and Debit Cards

Until a few years ago, telling the difference between a debit card and a credit card was fairly easy. A debit card was used at an ATM machine to withdraw or deposit cash with a PIN number and the credit card was used at check-out to buy things. Now the differences aren’t too obvious. Both carry the same logos and both can be swiped to make purchases. Despite these similarities there are clear differences.

A debit card is directly linked to your bank account, so every transaction you make deducts from this account. Not only could this discourage overspending but can be useful if you want to spend within a fixed budget. If you exceed your balance, many banks offer overdraft protection which either charges an overdraft fee or allows you to borrow from an overdraft account with or without interest according to policy.

Credit cards offer you the option of paying for more than you can currently afford. You are basically borrowing the card issuer’s money to make purchases. Usually a period of 15-45 days is given to pay the amount back interest-free. Obviously problems arise when you can’t pay back in a timely fashion resulting in rapidly accruing interest. Nevertheless, if used responsibly, credit cards can confer benefits in the form of “rewards” through cash-back, gift certificates, discounts, etc.

Also, credit cards and debit cards have different legal protections associated with each when dealing with problem transactions. Under federal law, in the event of a stolen credit card, you are responsible for the first $50 dollars of the unauthorized transaction. If the transaction was made online, you are free from liability. Visa and MasterCard offer Zero-liability policies which can be another tier of protection against unauthorized purchases. If you notice a fraudulent charge, enter a dispute claim by notifying the card issuer and the charge should be removed.

For debit cards, the rules are similar but a lot less broad. Your liability remains $50 only if you notify the card issuer within 2 business days; the liability could increase to 500 dollars. Most transactions are via PIN number access: funds are deducted from your account within 24 hours. Due to the fact that your money has already been transferred by the time you raise suspicions, you do not have the leverage that exists with credit card purchases to dispute fraudulent transactions. Credit card purchases, usually done with signatures, require 2-3 days to process.

In conclusion, the most effective way to utilize your non-cash options is to utilize the advantages of both. For instance, use your debit card for day-to-day cash expenses such as groceries or gas and count on the added protection of credit cards when you purchase things online.


Source: Barrett, Jennifer. “Credit and Debit Cards: What You Need to Know.” New York Times. 6 Jan. 2009. 10 Sept. 2009.

Charles Park

From an early age, I've always imagined myself in a role that served people in need. My sole satisfaction would be the knowledge that lives were better off thanks to my services. These musings didn't stem from careful deliberation nor obedience to a certain philosophy. Of course, there clearly was naivete within these musings. My service needed to be acknowledged and appreciated and for such service to be worthy of appreciation it needed to be grandiose in scale. Adoring crowds seemed to be the main purpose seemingly as the ultimate goal. As I spent most of my younger years in a small town, Macon, GA, these musings remained musings as I conveniently reasoned that there was a lack of an appreciable crowd. Yet, the unquestioning urge to serve still remained through high school. I became interested in volunteering for the less fortunate. I avidly participated in an organization called Meals on Wheels which home-delivered meals to senior citizens and the invalid. Through this experience, I was exposed to a vast clientele with diverse backgrounds. The clients that struck me most were those burdened both physically and financially by illness. While weaving through the clutter of life-sustaining equipment in a cramped apartment, I still can't forget the smile the bedridden gentleman gave as I delivered his dinner. Safe to say, from then on, I started to understand and appreciate the significance of such seemingly small and trivial acts in people's lives. I have been committed ever since. I'm currently a junior majoring in Chemistry at UNC-Chapel Hill and still strive to serve the less fortunate in small but significant ways. I am currently volunteering as staff in the Orange County Rape Crisis Center. I also volunteer as a companion with the non-profit group A Helping Hand. A Helping Hand is a companionship service for senior citizens and temporarily or permanently disabled citizens. When I don't muse about the various differences I could and should be making in people's lives, I enjoy hiking and playing tennis. I am deeply interested in the current health care reform debate and hope to pursue a career in medicine. I also wish to continue writing about the evolution of health care and its socioeconomic impact on the lives of everyday Americans.

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