How do credit cards and debit cards differ?
A debit card is like an alternative payment to cash or checks. It is also known as a bank card or a check card. The amount of money on your debit card is directly proportional to the amount of money you have in your checking account.
Every time you use your debit card, money automatically gets withdrawn from your account. Some debit cards will be denied if you don’t have enough money in your checking account to make the purchase, and some will automatically charge you a large overdraft fee (for going over your limit) and a percentage of how much the charge was for. However in the latter case, your card won’t be denied.
Debit cards have become widely popular because of the hassle of paper money and checks. They also do not have any interest fees or hidden fees (unless you go over your balance). The debit card also has a security feature where you have to enter your personal pin in order to charge the card. This is good because anyone who steals your debit card will have to know your pin before using it.
A credit card is not the same thing as a debit card. You have a certain credit line which is an amount of money you can charge to your credit card. You can charge anything up to this credit limit.
You are not forced to pay off everything on the credit card monthly, but must make the minimum payment as well as interest charges. The issuer grants you a line of credit which is like borrowing money. You can continue your balance of debt subject to interest.
Credit cards are good because you have an opportunity to build a good credit line. They also offer more fraud protection than charge cards and small short-term loans to be quickly made without calculating before a transaction.
However, you do have to be careful of the high interest rates and ever-increasing debt if you use your credit card too much. Some cards collect a 30% rate if a payment is missed. You have to be careful about overusing your credit card. People have gotten themselves into heavy debt because of credit cards and accumulated payments.
Credit cards you have a set limit, pay interest and is reported to the credit bureaus. Debit and prepaid only allow you use what you have available. Debit cards typically are associated with a bank account and prepaid cards are cards that you can add cash to at any given time. All 3 can be used to make purchases as long as they have a “visa” , “mastercard” logo.
