There are plenty of people out there with credit and debit cards in their wallets that they use to pay for purchases at a variety of different locations. From online shopping to paying at the gas pump, they provide a convenience to your shopping that few other methods of purchasing can match. But while they’re a prevalent fixture in most people’s wallets, many people don’t understand all of the differences and similarities between the two types of cards. If you hope to gain a better understanding of debit and credit cards, it isn’t hard to do when you look at a few key considerations.
Both credit and debit cards can be used practically anywhere, and there are actually few distinctions between the two that are made during a purchase. In some cases you might provide your PIN with debit purchases and your signature with credit, while in others your signature will be enough for debit or credit. You can use debit cards for online purchases, over the phone purchases, and anywhere else that credit is accepted. And most of the cards issued for debit purposes today are affiliated with one of the major brands of credit cards, ensuring that you’ll know just where you can use it.
While on the surface there may not be many differences, a look behind the scenes shows real differences. Debit cards are issued when you open a checking account and unlike credit you won’t have to go through any kind of credit checks or approval. You also won’t pay any interest rates, annual fees, or other costs that normally accompany credit cards and their use. Debit is a cheaper way to pay while still getting the convenience of credit. You’ll get the buying power and simplicity but without the expenses that total up through their regular usage.
Purchases that you make with debit cards are automatically deducted from your bank account. They’ll be posted between one and three days later, allowing you to use online banking to track your expenses. And while you may pay a small monthly fee or – if you make a mistake – and overdraft fee, you won’t run the risk of high credit card debt. And when you consider that prepaid debit cards exist and can help you teach your children valuable financial lessons, they’re more useful than most realize. Credit has its place, but for most Americans utilizing the power of debit is an option they shouldn’t ignore.