What’s the Difference Between a Debit Card and a Credit Card?

You would be surprised at how many people do not know the difference between a debit card and a credit card. Some even think it’s one thing and wonder why it has two names.

Weird right? If you are one of those people, then this piece is here to tell you just how different these two are.

Debit and credit cards are used to pay for goods or services without paying in cash or writing a cheque. The difference is where the money to pay for the purchase comes from.

A Debit Card

Also known as bank cards or check banks. It is a rectangular piece of plastic resembling any charge card linked to the user’s checking account at a bank or credit union.

It is an installment card that deducts money directly from a consumer’s checking account when it is used.

They can be used to buy goods or services or get cash from an automated teller machine or a merchant who’ll let you add an extra amount to purchase.

Whether used to obtain cash or buy something, the debit card functions the same way. It draws the funds immediately from the affiliated account. So, your spending is limited to what’s available in your checking account, and the exact amount of money you have to spend will fluctuate from day to day, along with your account balance.

The amount of money that can be spent with it is tied to the account size (the number of funds in the account).

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They also have daily purchase limits, meaning you can’t spend more than a certain amount with them in one 24-hour period.

You will also need to enter your pin with a debit card.

2. A Credit Card

A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company that allows people to buy items without cash.

Unlike a debit card, when you use a credit card, the amount will be charged to your line of credit, meaning you will pay the bill later, which also gives you more time to pay.

Your credit limit is the maximum amount you can borrow. It allows you to access a credit limit that your credit card issuer provides. Instead of giving you the full loan in cash, the card issuer lets you take as much of the credit limit as you want at a given time.

As you pay the minimum monthly payment required by the issuer, you can continue to borrow as long as you do not reach the credit limit.

What makes it different from a regular loan is that your limit is available after paying down the balance.

Having a credit card is very useful and convenient when there is an emergency. If you suddenly need to pay for a repair in your house, you can put the charge on your credit card.

If you probably did not plan for this expense, your credit card company will extend your credit until you pay the bill at the end of the month. Again, this gives you extra time to pay for something you weren’t expecting to pay.

While credit cards and debit cards look identical, they function differently. You’re borrowing money from the credit card issuer with a credit card. With a debit card, you’re using money from your checking account to pay for purchases.