Difference Between a Debit Card and a Credit Card

For those who have followed this site long enough, you know I am a credit card person. Though I have a Bank of America Check Card in my pocket all the time, I only use it to withdraw cash. But I am not paying my purchases with cash, nor with a debit card. I use credit cards to pay stuff I buy, even if it’s just a few dollars. For me credit cards are friend, not foe, because

  1. Using credit cards help me establish credit history;
  2. Using credit cards makes tracking my spending easier;
  3. I can earn rewards and cashbacks with credit cards;
  4. I can borrow money for free from credit cards;

I won’t get any of these benefits from a debit card. However, since I don’t use debit card, thus never paid any attention to it, I know my perception of debit card may be wrong. After all, debit card is one payment option for many people.

Recently I had a chance to ask representatives from Visa a couple of general questions about debit card in order to have a better understanding of it. In the first part of the interview with Visa, my question is about the difference between a credit card and a debit card.

Q: How does a debit card work/differ versus a credit card?

A: Basically, debit cards are payment cards that or subtract funds directly from an account, accessing funds you have on deposit (“pay now”). For a debit card to work, you need a funded bank account to cover the transaction. Debit cards are sometimes referred to as check cards.

With credit cards, you can draw from a credit line or money made available by your card issuer. The card issuer may give you a grace period to pay for your purchases (“pay later”), and if you do not pay in full by the end of this period, you may be charged interest. Certain credit card issuers may charge interest from the date of the transaction even if you pay your balances in full every month so it’s good to know the terms and conditions of your card.

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