The differences between a credit and debit card that you may not know yet
Many of us are still using the plastic credit and debit cards in our everyday transactions since it was introduced in the mid-1960s.
Credit cards and debit cards have notable differences
Unlike traditional money that comes in inconvenient metal coins and paper bills, its plastic counterparts continue to be trendy due to its cool designs that make you look smart when you pull it out from your wallet or purse. Although both cards made our daily spending convenient, credit and debit cards have some notable differences aside from the source of the money.
Fund sourcing and limitations
Debit cards simply get their funds directly from your checking account, so you’re just spending your own money, leaving you without debt after making a purchase. Credit cards, on the other hand, get their funds from a bank that allows you to borrow a certain amount of money. When you use a credit card to make a transaction, you have to pay the bank who have initially paid for your purchase. Having both cards can make you a wise spender, mostly if you’re familiar with its spending capabilities. For example, you may want to use your credit card in making business-related purchases where you may want to stretch the payment. Consider using your debit card when making small personal purchases within your budget. If you’re using a credit card to fund an emergency situation like hospitalizations ensure that you are capable of paying your monthly dues to avoid high-interest rates.
Perks may vary in both cards
There are some situations where using a credit card is preferable to using a debit card, and vice versa. Debit cards are worth considering to use in stores that offer rewards, discounts, or even cash back. There are debit cards nowadays that support multicurrency which could be beneficial if you're a frequent traveler. Some credit cards may offer such perks; however, it could lead you to spending more money than you can afford and that may come with high-interest rates. Hotels and car rental companies often prefer that you use your credit card as a protection when you avail of their services. Credit cards are often handy when you have insufficient debit card balance. You may want to determine what type of card you’re going to use before making a purchase to maximize each of the card type's benefits.
Although credit and debit cards have significant differences, you need to keep them safe from unauthorized use which may cause problems. Losing your credit or debit card could be a big hassle and you need to report it immediately to your bank to temporarily suspend your account.