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Credit Card vs Debit: What Are the Differences?
Did you know that the average credit score is 714?
It can be hard to keep track of all the different types of credit cards and debit cards.
There are a lot of different types of credit cards and debit cards, and it can be hard to keep track of them all. They all have their own unique benefits and drawbacks.
But don’t worry. Keep reading because, in this credit card vs debit card guide, we’ll compare and contrast the two most popular types of payment cards-credit cards and debit cards. We’ll help you decide which type of card is right for you.
1. How Much You Can Borrow
When it comes to credit cards, you can usually borrow up to your credit limit. This is the maximum amount of money that the card issuer will allow you to spend.
Debit cards, on the other hand, are linked directly to your bank account. This means that you can only spend as much money as you have in your account.
2. Interest Rates and Fees
Credit cards usually come with higher interest rates and fees than debit cards. This is because when you use a credit card, you are essentially borrowing money from the card issuer. They will then charge you interest on that loan. Debit cards, on the other hand, do not typically come with interest rates or fees.
3. Building Credit History
One of the main benefits of credit cards is that they can help you build a positive credit history. This is because every time you make a purchase with your credit card, the card issuer will report it to the credit bureaus. Over time, this can help to improve your credit score. Debit cards, on the other hand, do not typically help you build a credit history.
4. Fraud Protection
Both credit cards and debit cards come with built-in fraud protection. However, the level of protection may differ between the two. For example, some debit cards may only provide limited protection against fraudulent charges.
Credit cards, on the other hand, often come with much more comprehensive fraud protection. This means that if your credit card is ever lost or stolen, you may be able to get your money back.
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5. Rewards and Perks
Credit cards often come with rewards and perks that can save you money. For example, many cards offer cash back or points that can be redeemed for merchandise, travel, or other items. Debit cards typically do not offer these kinds of rewards.
6. User Protection
When you use a credit card, you are protected by the Fair Credit Billing Act. This law provides certain rights and protections for consumers, such as the right to dispute charges and the right to a refund if goods are not delivered as promised.
Debit cards are not subject to the Fair Credit Billing Act. However, they are protected by the Electronic Funds Transfer Act, which has similar protections.
7. Access to Emergency Funds
If you ever find yourself in a financial emergency, your credit card can be a lifesaver. This is because you can use it to borrow money that you may not have access to otherwise. Debit cards cannot be used to borrowing money in an emergency.
8. Acceptance
Credit cards are accepted by a wide range of businesses, both online and offline. Debit cards, on the other hand, may not be accepted by all businesses. This is because some businesses may not want to deal with the extra fees associated with debit card transactions.
9. Convenience
Credit cards can be more convenient than debit cards in some situations. For example, if you’re renting a car or booking a hotel room, you may need to provide a credit card number in order to do so. Debit cards can also be used for these purposes, but they may not always be accepted.
10. Security
When you use a credit card, your purchase is protected by what’s known as the zero-liability policy. This means that if your card is ever lost or stolen, you will not be responsible for any unauthorized charges. Debit cards may also offer this protection, but it is not required by law.
11. Peace of Mind
Credit cards can provide a sense of financial security that debit cards cannot. This is because credit cards come with built-in protections against fraud and errors. Debit cards may also offer these protections, but they are not required by law.
12. Flexibility
Credit cards offer a lot of flexibility when it comes to payment options. For example, you can often choose to pay your balance in full or make minimum payments each month. Debit cards typically do not offer this kind of flexibility.
13. Travel Benefits
Credit cards often come with travel benefits that can save you money and make your travels more convenient. For example, many cards offer free rental car insurance, baggage insurance, and trip cancellation insurance. Debit cards typically do not offer these kinds of benefits.
14. Emergency Cash Advance
If you find yourself in a financial emergency, you may be able to get an emergency cash advance from your credit card issuer. This is a loan that you can use to cover unexpected expenses. Debit cards cannot be used to get an emergency cash advance.
Credit Card Vs Debit: Which One Wins?
In conclusion, it is important to understand the difference between credit and debit cards in order to use them correctly. Although both types of cards allow you to make purchases, they each have different features and benefits that you should be aware of before using them.
By understanding the key differences between these two types of cards, you can decide which one is right for your needs.
Want to learn more? Check out our blog for more articles like this credit card vs debit debate.
Kenneth is a proud native of sydney, born and raised there. However, he pursued his education abroad and studied in Australia. Kenneth has worked as a journalist for almost a decade, making valuable contributions to prominent publications such as Yahoo News and The Verge. Currently, he serves as a journalist for The Hear Up, where he focuses on covering climate and science news. You can reach Kenneth at [email protected].
