Recognizing the difference between debit and credit cards can help you make a sound decision to get the perfect option for your needs. While both options have benefits and disadvantages, it’s important to understand the details of both.
What is a debit card?
The sole purpose of a debit card is to access funds from a bank account without writing a check or withdrawing funds. Debit cards are typically issued by a bank to its customers when opening a checking account. Money is withdrawn directly from a bank account without any type of payback required.
What is a credit card?
While credit cards look similar to debit cards, they function in very different ways. A credit card allows you to borrow money against a line of credit to make basic transactions, requiring a payback that adds interest to a balance that is not paid in full. A credit card can help you build credit and earn rewards.
What are the pros and cons of a debit card?
Some of the advantages of debit cards include no payments or interest charges; the convenience of using anywhere credit cards are accepted; the ease of withdrawing cash; and targeted spending to only spend what’s in your account.
Disadvantages of debit cards include unexpected fees like transfer fees and overdraft fees; the use of a pin number that you must remember; no help building your credit score; and less fraud protection than a credit card.
What are some pros and cons of a credit card?
A credit card can help you build credit and earn rewards, as well as provide a positive payment history; most credit cards offer more fraud protection than debit cards; some credit cards offer rewards or cashback on purchases.
Some cons to using a credit card include vulnerability to incurring debt; interest charged on any unpaid balance; and fees for late payment, over-the-limit, balance transfers, and cash advances.
What does it mean to use your debit card as a credit card?
When you’re given an option to choose “credit” when using your debit card, you won’t need to use your pin to complete the transaction. But your debit card still will not give you the benefits of a regular credit card such as consumer protection or building credit. Each choice determines how the merchant processes the card. For example, debit transactions are withdrawn immediately while credit purchases can take a few days.
How do I know which card is best for me?
Choosing between a debit and credit card depends on your spending habits and how you’ll use it. If you have a history of overspending, a debit card will keep you on track. If you consistently pay off your balance every month, a credit card can build credit and earn rewards. A third option would be to have both a debit and credit card to use for different purposes.
Learn more about credit cards and debit cards on the First Keystone Community Bank website or visit any of our 19 branch locations.
