How Debit Cards Are Different Than Credit Cards

Introduction

In the modern day, carrying of liquid money in the form of currency notes and coins has become a thing of the past due to the introduction of credit and debit cards. These cards have become ultimately popular because of their convenience and flexibility. They have eliminated the need for carrying notes and coins which are often bulky and cumbersome especially in making transactions of high monetary value. However, there is a major difference between the two cards, though used for more or less the same purpose and in the same places, debit cards and credit cards differ in a number of ways.

History

The major difference is that debit cards draw the money from your bank account while credit cards charge it to your line of credit. As the name suggests, a debit card generally debits your bank account which in accounting means to subtracts or pull out. It therefore deducts this money from your checking account as soon as you make the purchase. This is done by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank and it is transferred to the merchants account. This transaction may take a few days to complete depending on the general banking procedures in the specific country.

Credit cards however differ from debit cards in that the credit card allows you to borrow money in small amounts at local merchants; it is therefore a liability or a debt that you have to settle in the future. You use the card to make your basic transactions. The credit card company then charges you interest on your purchases, though there is generally a grace period of approximately thirty days before interest is charged if you do not carry your balance over from month to month.

 

Features

Therefore, in the modern day many people prefer debit cards to credit cards as the debit cards offer the same level of flexibility and convenience, but take it a notch higher due to the fact that you do not need to borrow money to complete your transactions as it is in the case with credit cards.

Another advantage that a debit card offers over a credit card is the fact that it discourages overspending. This is because you only spend what you have and the money in your account goes down with every purchase made. Debit cards therefore enable you to keep a good record of your expenses as this is reflected on your bank account in relation to every purchase made. This is different from a credit card which in essence allows you to spend more than you have. They basically allow you to use someone else’s money (the card issuer’s) to make a purchase while you pay the money back later. Debit cards therefore come out more superior especially in these days of economic downturn and inflation which require high levels of expenses control and management.

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