Credit Cards vs Debit Cards – A Comparison

In recent times, there has been an increased popularity with in the number of people opting for plastic money. Basically, plastic money can be broadly divided into two different categories that include debit cards and credit cards. In this regard, many people often get confused with which type of card to opt for. Mentioned below are some of the basic differences between these two card types.

1. The most important difference with respect to debit and credit cards lies in their definition itself. Debit cards are primarily related to the savings account of the customer. Whenever any individual uses a debit card for a specified amount of money, the same amount of money is debited from his/her savings account. Hence, debit cards can also be termed as secured cards. With a debit card, one can only withdraw or shop for the amount that is present in the savings account. In case of credit cards, card issuing bank provides credit to the customer that must be repaid within a specific period of time.

2. With a credit card, transactions can be achieved without any hassles. Most sites accept credit cards online. The same doesn’t hold true for debit cards. This is because if anybody wants to rent a car or reserve a hotel room using a debit card, there are chances where the transaction can be put on hold by vendors until the transaction gets processed and amount gets cleared. Also, the amount of money that is put on hold increases with the value of purchase. In case the savings account doesn’t have enough balance, there are chances of paying for overdraft charges. Using a credit card, there are no such risks.

3. Another disadvantage associated with debit cards is the amount of time taken to process the transaction. In case of debit cards, this time is usually 2-3 days. Also, this depends on whether the amount is present n the savings account or not. In case of credit cards, the transaction gets cleared the moment bill is submitted to the bank for clearance.

4. Debit card transactions, if carried on a debit machine issued by a different bank, can result in transaction charges because the validity of the customer is established based on the PIN. Normally, these charges are between 25 cents to $1. With a credit card, transactions are usually “signature-based”. As a result, one can avoid such charges.

5. Rewards offered on a credit card are much more in comparison to those offered on a debit card. Some of these rewards include air miles, cash-back bonuses, discounts on purchases and gasoline miles.

6. Only certain banks offer debit cards that are internationally valid. Also, the amount of money that needs to be deposited in the savings account to get an international debit card is much higher. However, almost every credit card can be used internationally.

7. Another danger associated with plastic money is the risk of scams. If the information on the card is not protected carefully, it can be used for fraudulent purposes. However, credit cards do hold certain advantage in this regard. In case of any identity theft involving credit cards, one has to pay an amount of only $50 irrespective of whatever may be the amount that has been stolen. With debit cards, users end up losing the entire amount that has been used in instances of fraud and unauthorized purchases.

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