Jan 17, 2010

Credit Card vs Debit Card

People now days are looking for convenient and safest way to keep and save money without being threatened of being robbed in the public. What people do is bring money just enough for their need. Or if not possible, they tag along their Debit card or Credit Card with them. Some apply for different cards along with them knowing that this will be the safest way of keeping money (At least if they would be robbed, only valuable items that they have will just be robbed and none with the cash). I'd prefer that as well rather than losing all of the cash that you've worked hard for. But what is the big difference of a Debit Card compared to a Credit Card. I've read an article with regards to this and come up of identifying some couple of advantages and disadvantages of these two cards.


Credit card is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. A credit card is different from a charge card, where a charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers to 'revolve' their balance, at the cost of having interest charged. Most credit cards are issued by local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 × 53.98 mm in size.

How it works:

The issuer of the card grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user.


• Convenience, basically because you don't need to bring money with you especially when you need it.

• Provides more safety to fraud compared to debit cards.

• You don't need to pay the item in cash giving you time to save money within 30 days.

• You get different promotional perks, rewards or discounts when using your credit card in different establishment.

• To the merchants, this mode of payment provides security to them because the issuing bank commits to pay the merchant the moment the transaction is authorized.


• Credit card only allows small short-term loans every month that should not exceed to the maximum credit line for the card. Usually this has an additional interest rates that varies depends on the credit limit of the card. Usually this causes bankruptcy to individuals.

• This could tie you up to finance charges that run up large debts that if cannot controlled will run you up to financial hole that you may never recover from.

• For merchants, they are usually charges a couple of interchange rate for every transaction obtained through a credit a card. That is why for some stores, they add up an additional interest as well if you're going to use your credit card.


    Now Debit Cards as defined (also known as a bank card or check card) is a plastic card that provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic cheque, as the funds are withdrawn directly from either the bank account, or from the remaining balance on the card. In comparison, a debit card uses the money you have and a credit card uses the money you don't have.

    How it Works:

    Like credit cards, debit cards are used widely for telephone and Internet purchases, and unlike credit cards the funds are transferred from the bearer's bank account instead of having the bearer to pay back on a later date.

    Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card. Merchants can also offer "cash back"/"cash out" facilities to customers, where a customer can withdraw cash along with their purchase.


    • Easy application unlike with credit cards you may find it difficult or impossible to obtain.

    • Unlike with credit cards, the use of this card is limited to the existing funds in the account.

    • This pays the items that you bought right away. That means transaction once authorized will automatically be deducted to your existing funds, so you don't need to think of bills arriving every end of the month.

    • Like credit cards, these are accepted by merchants with less interrogation, or scrutiny making the transaction quicker and less hassle.

    • Debit cards doesn't have an extra charge since the cash can be obtained right away from an ATM or PIN-based transaction at no extra charge, other than a foreign ATM fee.


    Many banks charges over-limit fees or non-sufficiency of funds based on pre-authorization or when it was attempted but refused the transactions by merchant. (just in case you don't know it, you might want to check it again)

    • Debit cards have low level of security protection. Theft can actually be done just by knowing their PIN using different devices. Some facts with this type of card: you can actually use your PIN instead of signature in signing the transaction slip.

    • Consumer can report possible or fraud cases to the bank no more than two days to be eligible for such waiver with a debit card (credit card have 60 days). With this, a thief can actually obtain or clone a debit card with its PIN and may be able to clean out the consumer's bank account before they know it.

    Since we know the difference of this two cards, we might actually add some additional security for the cards that we have just to overcome the disadvantages that we have on this card.

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