CREDIT CARDS AND DEBIT CARDS LOOK THE SAME, BUT THEIR “DIFFERENCES” ARE MORE IMPORTANT. In real simple terms, when you buy anything with a credit card, you are using money you don’t have. When you buy anything with a debit card, you are using your money. In fact, your money is removed from your bank account right after you pay for your purchase.
Stated another way, a debit card is just like a checking account, except you don’t need to manually write out the checks.
Conversely, every time you buy anything with a credit card, it’s as if you just took out a loan to make that purchase, which, of course, you will then have to repay. And for most consumers, they will be repaying that loan with interest.
In other words, a debit card uses money you already have and a credit card uses money that you don’t have.
Credit or Debit?
If you are accustomed to making purchases with a credit card, you are also very familiar with providing your signature, and/or picture ID, as part of the process for many purchases. When using a credit card, you will “not” be asked “Credit of Debit?,” along with being asked your preference between a plastic bag or paper bag, at your local grocery store.
You will only be offered that choice when using a debit card that is directly linked to your checking account. In which case, the transaction could be processed as a credit or debit purchase, and you may be offered the choice.
So, when your grocery cashier asks you “credit or debit?” the difference is more important than your answer for the next question of “paper or plastic?”
If you answer “credit”, then no money will be taken from your bank account, and the purchase will be just like using a credit card. If you answer “debit”, then the amount of money for your grocery purchase will be removed from your bank account.
Also, if you answer “debit” then you will usually need to enter your personal identification number (PIN) to complete the transaction.
Which is Better?
If you are able to respect that using credit cards is like taking out a small loan every time you make a purchase with one, and that you will be paying interest on your purchase if you don’t pay it back within the required time (usually 30 days or less), then credit cards can be a very handy way to handle money.
On the other hand, if you use a debit card, you are simply spending money that you already have, and therefor do not need to be concerned about having to pay interest for making purchases.
In other words, one is not inherently better than the other. It’s really a matter of your own understanding, responsibility and discipline that controls how one card may be better than the other.
Too Much Credit Card Debt?
Having said that, if you have gotten yourself deep in debt and it’s having a bad effect on your life, you should consult with a professional debt negotiation firm to get the facts about getting out of debt. A professional debt negotiation service has the ability to work on your behalf to significantly reduce your credit card bills, without filing bankruptcy.
Want to find out more?
Click “Contact EFS” for a no cost consultation to find out for yourself how to get your existing credit card debt dramatically reduced.