Debit cards and Credit cards have become so popular in the world today. They’re issued by companies like Visa, MasterCard, American Express, or Discover, through financial institutions like commercial banks and primarily used to make payments, withdraw cash and perform online transactions. However, Debit and Credit Cards are not the same, even though they serve the same purposes, they are very different from each other.
What Is A Debit Card?
A debit card is the most common bank cards Debit cards are linked to your bank account. When you swipe them at stores or use them online, the money is debited to a checking account linked to the Debit Card.
Debit cards offer you the choice to make purchases with the money in your bank account without paying the actual cash. Companies like Visa and MasterCard issue Debit Cards through commercial banks, to their customers who can use them to make transactions on any store that accepts Visa cards or MasterCard or withdraw cash from the ATM. Usually, there’s no interest rate charged for using Debit Cards but some other fees can be accumulated from the card usage, such as ATM fee and Maintenance fee.
What Is A Credit Card?
A credit card is a type of card that is issued by banks and gives the cardholders the benefit to make purchases by borrowing from a credit limit, depending on one’s credit score.
A credit limit(the maximum amount you can spend from the card) will be assigned to the cardholder when approved for a credit card.
This amount can be spent regularly and paid back without interest, if and only if it’s paid back before the next billing period but in case of any default on the monthly regular payment, the cardholder will be charged interest on the card balance and this could reduce the credit score.
Credit cards are simply meant for taking transactions from an available credit provided by a bank which would be repaid on a later date. Credit cards are issued by companies like Visa and MasterCard through banks, to their customers. These cards can be used to make transactions in any store that accepts Visa and Mastercard
When To Use Debit and Credit Cards
From the explanation above, you must have gotten an idea of what Debit and Credit Cards are and the reason for using any of them but there are different scenarios when these cards are used.
Debit Card
Debit cards are only used to make payments and withdrawals when there is available credit on the checking account to which the Debit Card is linked. When such a transaction is made, the account is debited accordingly.
Credit Card
Credit Cards are used when there’s available credit on the card which can be used to make transactions and withdrawals without any available credit on the bank account linked to the Credit Card.
