Credit cards are one of the most popular methods for people to purchase things. Debit cards, on the other hand, are often considered a second-tier option when it comes to spending money, but is that actually true? In this article, you’ll explore what makes a credit card different from a debit card and how they differ in terms of their role in your finances.
Withdrawing funds
Withdrawing money from a debit card is similar to withdrawing cash from an ATM. You will need your PIN and an access code to complete the transaction. However, some debit cards don’t require any personal information at all in order to ensure maximum protection against fraud.
Withdrawing money using a credit card is similar to taking out cash via a loan or line of credit because it involves obtaining funds that can be spent instantly.
Transaction fees and deposit deadlines
A debit card is a plastic card that accesses funds from an account. Most banks offer debit cards, and they’re the most popular form of payment among Americans.
A credit card is a plastic card that accesses funds from an account—but unlike a debit card, it allows you to borrow money and pay interest on it. If you have good credit, this can be really helpful for making large purchases; however, if you don’t repay on time, it can become very expensive.
Overdraft fees
Debit cards and credit cards both have their pros and cons. For example, debit cards are generally much less expensive than credit cards with no annual fee and lower interest rates on balances.
Though, the downside of using a debit card is that you don’t get the same rewards as you would with a credit card. Debit card users also need to be careful about overdraft fees, which can quickly add up over time if not managed properly.
Fraud and theft protection
If you’re using your debit card, the money will come straight out of your bank account. If you have a credit card and someone steals it, they can charge things to your account without having any access to your actual cash. This is why credit cards provide better fraud and theft protection than debit cards do—and why some people prefer to use their credit card instead of their debit card while traveling abroad.
Cash back rewards and credit card perks
If you’re looking for cashback rewards, credit cards are the way to go. Debit cardholders can only earn points on debit purchases, but with a credit card, you can earn rewards on all types of purchases. Depending on how much you spend and what type of cashback you are looking for, the annual fee charged by your card could be worth it.
When it comes to other perks like travel insurance and extended warranties, credit cards offer these as well—but only if they’re purchased directly through an airline or retailer using your credit card.
One can also purchase a money order with credit card as well as debit card but there would be a fee charged on credit card. According to financial advisors like Lantern by SoFi, “While you may be able to purchase a money order with a credit card, it can be a very costly way to do so.”
In conclusion, you should always be aware of the credit card debt that you’re accumulating and make sure it doesn’t get out of hand. It’s important to understand what kind of cards you have, how they work, and why they might not be the best option for your financial situation.