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Using a Debit Card Versus a Credit Card: Pros and Cons

Using a Debit Card Versus a Credit Card: Pros and Cons

14 Dec 2023


Have you ever needed clarification as to the main difference between a debit card and a credit card? So how is it easy to see? Can we send money online through debit and credit card? Many places take both credit cards and debit cards. Both provide convenience and do away with the need for carrying cash. Even share the same appearance.

The primary distinction between a debit card and a credit card account is where the cards draw the money. A credit card charges your credit line, whereas a debit card deducts money from your checking account.

What Is a Debit Card?

Although they operate differently, debit cards provide the convenience of a credit card.

When you make a transaction with a debit card, money is taken right out of your checking account. They fulfill this by putting a hold on the total amount of the purchase. The transaction is then handed over to the bank by the merchant, who then receives a credit to their respective account. This can take a few days, and the hold might disappear before the transaction is completed. 

You must enter your identification number (PIN) to use your debit card at merchants or ATMs. However, most retailers allow you to use your debit card without providing a PIN. The receipt will require your signature, just like a credit card. Here are some further details on debit cards.

Debit card use does not impact your credit history, and you won't pay interest on your purchases.

The money is instantly deducted from your account when you pay using a debit card.

When to use a debit card

As a broad rule, here are some points to consider when deciding if using a debit card is the best option:

You need quick cash access via ATMs or at the POS device when a loved one do online money transfers to you.

You are debt-averse and want to control your expenditure. 

You do not own a low-interest or no-interest credit card.

Pros of Debit Cards

· Debit cards are linked to your checking account, which means you can only spend money you already have. This can help prevent overspending and debt.

· Transactions made with debit cards are processed quickly, making them a convenient option for everyday purchases.

· Debit cards are widely accepted and can be used at most retailers, online stores, and ATMs.

· Some debit cards offer rewards or cashback, just like credit cards.

· Debit cards can be used to withdraw instant cash at ATMs, which can be helpful in case of an emergency.

Cons of Debit Cards

· If your lost card is lost or stolen, it can be used to withdraw money from your checking account or make unauthorized purchases. This can lead to potential financial loss.

· Debit cards do not offer the same level of consumer protection and security as credit cards. For example, if you dispute a charge made on a debit card, you may have to wait for a resolution, while credit card disputes can be resolved more quickly.

· Some debit cards may have a spending limit, which can be inconvenient if you need to make a large purchase. 


 

What Is a Credit Card?

A credit card lets you borrow money against a credit limit also referred to as the card's line of credit. 

You use the card to make simple purchases that appear on your statement; the issuer pays the retailer, and you pay the issuer later when you receive your bill.

If you carry a debt monthly, interest will be applied to your purchases. Credit cards have higher interest rates than other loans, and your credit card balance and payment history may impact your credit score.

When to use a credit card

Credit cards might be the safer payment option if fraud protection concerns you. Since chip-enabled EMV credit card processing has become the standard in the United States and internationally, they are even more secure.

Credit cards are only sometimes safer than debit cards when making purchases online.

Your account number is still vulnerable to theft, allowing scammers to charge unauthorized charges. On the other hand, credit cards can provide excellent liability protection if this occurs, making them a more secure option for eCommerce.

The majority of major credit cards are also widely accepted, making them the preferable option while going abroad. In contrast, any debit cards you use might be out of network, resulting in higher ATM fees and a worse exchange rate when you take money from an ATM.

Other situations to think about when choosing between credit cards and debit cards are: 

You're very sure you can pay the bill off each month.

You want to raise your credit score; the interest rate is meaningless if no balance is left on your credit card after each billing cycle.

Using your credit card responsibly is one of the quickest methods to improve your financial situation.

Pros of Credit Cards

· Credit cards offer a line of credit, which means you can spend money you don't currently have. This can be helpful in case of an emergency or if you need to make a large purchase.

· Credit cards offer various rewards, such as cashback, travel points, and other benefits.

· Credit cards offer consumer protections, such as fraud protection, which can help you if your card is lost or stolen.

· Credit cards can help you establish a credit history, which can help you get a loan or a mortgage.

· Some credit cards offer a 0% interest rate for a promotional period which can help you save money on interest charges.

Cons of Credit Cards

· Credit cards can lead to overspending and debt if not used responsibly.

· The interest rates on credit cards are generally higher than debit cards, which can result in paying more interest charges.

· Credit card companies may charge fees, such as an annual fee or a late payment fee, which can add to the cost of using a credit card.

· Some retailers may not accept credit cards or may charge an additional fee for using a credit card.

Wrap Up

In conclusion, both debit and credit cards have pros and cons. Debit cards are best for those who want to avoid overspending and debt, while credit cards are best for those who want the convenience of a line of credit and the rewards and protections that come with it. Choosing a debit card and a credit card depends on your financial goals, spending habits, and creditworthiness. It's essential to understand the terms and conditions of each card and choose the one that best suits your needs. 

And if you wish to send money online to your loved ones across borders, you can do so via ACE Money Transfer using your credit or debit card. So, give it a try, as it's fast, reliable, easy, and fee-free. 
 

FAQs

What is the primary difference between a debit card and a credit card?

The primary difference is how they access funds. A debit card withdraws money directly from your checking account, while a credit card allows you to borrow money up to a credit limit and pay it back later.

What are the advantages of using a debit card?

Debit cards promote responsible spending since you can only spend what's available in your bank account. They also don't incur interest charges or debt, making them a good choice for budget-conscious individuals.

What are the advantages of using a credit card?

Credit cards offer benefits such as rewards programs, cashback offers, and purchase protection. They can also help build a credit history when used responsibly, which is important for loans, mortgages, and lower interest rates in the future.

What are the disadvantages of using a debit card?

Debit cards may lack the same level of fraud protection as credit cards. If your card is compromised, thieves can access the money in your bank account directly. Also, they don't offer the same rewards and benefits as credit cards.

What are the disadvantages of using a credit card?

The primary disadvantage of credit cards is the potential to accumulate high-interest debt if not used responsibly. Late payments and high credit card balances can negatively impact your credit score and lead to financial stress if you carry a balance from month to month.


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