Knowing the difference between a credit card and a debit card will allow you to make smart decisions regarding your finances. Both credit cards and debit cards are accepted in the same places to make transactions and purchases. Debit cards usually have the symbols of one of the credit card types printed on them, and you can use them to make transactions and purchases in all places that normally accept credit cards. In these terms, both types of cards are convenience.

The main difference between your credit card account and your debit card account is which source these cards use to pull the money. While your debit card charges your purchases from your bank account, your credit card account uses your line of credit to settle your charges from credit cards.

What’s a debit card?

Debit cards offer you the convenience of using the credit card, but they work in a completely different way. When you use debit cards, they draw money straight out of your checking account once you make your purchase. After this, the merchant will send the transaction to their own bank and it will be sent to the merchant’s account. It might take up to a couple of days for this to take place, and the hold may drop off prior to the transaction going through. This is why it is so important for you to have a running balance on your checking account so that you would make sure not to accidentally overdraw money from your account. It is still possible for you  to overdraw your debit card, even though it doesn’t hold any credit balance. To use your debit cards, you will have a PIN number to use your card when shopping or withdrawing money from an ATM.

However, you can still use your debit card at merchants without a pin. You simply need to sign a receipt, the same way you would do with your credit card.

What’s a Credit Card?

The credit card allows you to make purchases and transactions by borrowing money in different small amounts with local merchants. You can use this card to if you want to make any basic transactions.

After this, your credit card company will charge you an interest on all your purchases. Although, there is usually a grace period that lasts about thirty days before your bank will charge you interest for carrying your balance from one month to another.

Which is better to use: Credit card or Debit card?

It might be difficult for you to determine whether you should use your debit card or your credit card. Some feel like using credit cards offers you some additional insurance when purchasing. It also makes it easier for you to request a return nor a refund from a merchant. One way or another, you should make sure to read the disclosure information from your credit card carefully, if you want to understand all the benefits that come with it.

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