The convenience and security that credit and debit cards offer is insurmountable, but both of them do have differences that can directly or indirectly play havoc in your wallet.
Consumers often get confused over which card to pay with at the point of sale, not knowing the difference between the two. This leads to some very bad on-the-spot decision making for the customer and to some extent the merchant as well.
How can we know which card to use, and when?
They May Look Alike, But Are Not
There’s not much difference with how credit and debit cards look, as both the cards are completely similar with a 16 digit card number, expiration date, and PIN code embossed on the piece of plastic. The similarity lies in the function and payment processing of both the cards.
Debit Cards: Consumers do transactions, and pays for them by using the available funds from their own bank account. The consumer can use as much funds that are available in the account.
Credit Cards: Consumers ‘borrow’ money from the company or bank that issued the card, and pay for transactions. The borrowed money has to be paid back to the issuer at a later given date. There are various types of credit cards, each having some benefits and limitations but all of them give the consumer untold freedom.
After a transaction, credit card users have to provide their signature, which is a proof the merchant gives to the card processing company for completion of the entire transaction. For debit cards, a PIN code is needed for every transaction to take place, and the amount is automatically deducted from the consumer’s bank account.
Benefits and Drawbacks – Credit vs. Debit
Consumers should know where to use the cards, and when. This is only possible if they know about the advantages and disadvantages of both.
Advantage Of Debit Cards: Fees And Control In Spending
Consumers who are frugal use debit cards because of few or no fees charged on their accounts. They use debit cards because it feels and acts the same way as using paper money, but with more security of course.
Consumers can curb their over-spending habits, because a debit card can draw only as much funds that are available in the bank account.
Advantages Of Credit Cards: Rewards, Warranties And Legal Protection
Consumers can attain cash prizes, discounts, and many other perks by using credit rewards cards. Those consumers with a timely pay back history can increase their credit score limit as well.
Moreover, the credit card company will provide a warranty on items purchased against any defect from the merchant’s side, also providing legal protection to the consumer when disputing transactions, lost or stolen cards, and car rental ability.
Both cards have advantages over the other, and consumers don’t really care when using either a debit or a credit card. Stop and think before swiping that piece of plastic.