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The differences between credit and debit cards that young people need to understand before applying

Debit and credit cards are both used and accepted at many of the same places of cash to pay for things you buy.

The convenience and protection that they offer are hard to beat; credit and debit cards typically look almost identical with: 16 digit card numbers, expiration dates, and both are made of plastic with pin codes.

They also work for a similar purpose to offer convenience and eliminate the purpose to carry cash.

The fundamental difference between a debit and a credit card is basically where the cards pull the money while paying for your purchases or service offered.

A debit card draws the money from your bank account and a credit card charges it to your line of credit.

It’s a question that many people have been asking almost every day: which one should we use, what is the difference between the two, and when and why is it so important to know the difference?

There is actually a lot separating the two, but most people don’t really think about that much.

 

Facts Regarding Debit Cards

Debit cards are used to pay for goods or services in shops and withdraw money at a cash machine.

Debit cards allow a bank customer to spend money by drawing on funds that they have deposited at the bank, the money is automatically taken from your current account.

It’s very important to make sure you have enough money in your account or an agreed overdraft to cover the transaction.

A debit card is a payment method that is linked to your bank account; the money you spend comes right out of your own personal checking or savings account.

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The card offers the same convenience to pay for goods and services without requiring you to walk around with cash or borrow the money to complete the transactions.

The other good thing about Debit card is that the card is tied directly to your checking account.

Let’s say you need some paper money, if you have money in your account, you can easily withdraw cash from your Bank nearest ATM machines or any other ATM, but transaction charges may be higher.

If you need more information about charges charged for withdrawing from other banks ATM, visit your local branch.

After swiping your debit cards at the point of sale, money is automatically taken out of your account. It’s just like using cash but in this case, it’s more convenience since you don’t have to carry cash.

Transacting using a debit card is also great because, if you are enrolled in online banking, it helps you to keep track of what you spend by reviewing your transactions online or check your balance at ATM machines.

The bad thing about the debit card is that the card can be declined, this scenario can only happen when you don’t have enough money in your account to cover your purchase. Make sure to balance your checkbook whenever you make any transaction.

Some banks allow customers to overdraw their checking accounts for a fee; you can visit your local bank to find out their specific policies.

 

Facts Regarding Credit Cards

A credit card is a card that allows you to borrow money against a line of credit from the card issuer up to a certain limit order known as the cards credit limit.

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The line of credit allows you to use the card to make basic transactions which are then reflected on your bills.

A credit card is also used as a payment method; Some people think that a credit card is working like a short-term loan because essentially, you are borrowing money from a card issuer to pay for your purchases instead of tapping into your own money.

Credit cards have interest rates and your credit card balance and payment history can affect your credit score.

A credit card can really help in emergency situations when you are short on cash.

The credit facility enables you to buy things immediately up to a pre-arranged limit and pay for them at a later date.

The cost of the purchase is added to your credit card account and you will get a statement every month. The quicker you pay off your balance the less interest you will pay.

Some banks or credit card issuer, provides credit cards with extra perks like grace periods that allow you to make purchases without charging you interest as long as your balance is paid in full each month.

They also reward their customers with points, the points can be used in all sort of things like airline miles or hotels stays, some cards even offer cash back every month.

Most credit card companies rate their customers’ credit worth on various aspects; for instance, when you pay your credit card bills on time or stay within your credit limit and your bill is paid in full, your credit rating gets better.

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These factors improve how your credit is evaluated and that might qualify you for lower interest rates on loans and credit cards.

When you miss your payment, you will be hit with late fees; these penalties affect your annual percentage rate, when the percentage rate is too high or even worse, you can have a negative effect on your credit.

It’s very advisable to carefully read the policies and disclosure information for your credit card to understand the benefits and the implications.

 

Key takeaway

Both are convenient and are accepted almost everywhere. They both offer same kind of fraud protection and security especially when compared to cash.

It’s safer and easier to travel with a credit or debit card rather than carrying cash or using a checking book.

Smart shoppers who can control their spending are probably wise to reap the benefit offered by credit cards for the majority of their purchases.

Debit cards protect the frugal from fees and ensure that less disciplined spenders stay within their means.

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