Instead of using cash or checks when paying for goods and services, we can use debit cards or credit cards. You’re probably asking the question: “Then is there any difference between a credit and debit card?”. Let’s find out the answer in the following article:
The definition of credit and debit cards
Debit card is a physical plastic card containing personal banking account information on it. When purchasing with a debit card, you will swipe, insert the card with a POS (Point of Sale) to transfer your banking information to the store. Then your bank will transfer the money to the store under your request.
That also means the debit card is connected directly to a specific checking account. And every time you make payment with your card, you are immediately spending the amount of money in your banking account.
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Just like a debit card, a credit card is also a physical plastic card with personal banking information in it. However, credit cards are not connected with your banking account; and the amount will be withdrawn from your pre-approved credit limit.
In other words, a credit card is actually a type of loan, which is “a line of credit”. Accordingly, when purchasing goods/services with a credit card, you’re borrowing money from the financial institution.
It is required that you must pay back the money you spend on your credit card within a fixed time (usually 30-45 days). Or else you will be charged an interest rate. In case you don’t make payments on time, your credit score and financial future will be negatively affected.
Use credit card or debit card?
In summary, the difference between these two types of cards is where the money to pay for the purchase comes from. If you’re wondering which one to choose, it depends on your convenience.
You can use both of these cards at stores, restaurants, or e-commerce platforms… When using debit cards, you must pay attention to the current amount in your banking account. Otherwise, when using credit cards, you must prepare money to pay back on time and remember your CVV number when purchasing goods/services.