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Do you know the difference between credit and debit card? These days credit and debit cards look so similar that most people don't even notice the difference. They both have VISA or Mastercard logo as well as can be used at all the same places. So why do we bother to look at debt cards differently? Well, even though they look and work the same way, the most important difference between them can impact your bottom line and that's why it is important to understand them correctly.
The main difference is quite obvious the moment you use a debt card. Debit card is directly attached to your checking or saving account. When you make a purchase on your credit card, you have upto 25 days(grace period) to pay it back. However, if you use debit card, the amount of purchase is deducted from your checking or saving account immediately. It is essentially equivalent to paying cash without worrying about the change. Also, if you don't have money in your account, your debit card is pretty much useless. Another important but often overlooked component is the level of fraud and consumer protection that comes with each card. If your credit card is stolen, under federal law you are only responsible for $50 of unauthorized charges. Further, if you notify your credit card company that your card was stolen before any charges are made you may not be liable for any charges at all. Finally, if the credit card is not physically present when a fraudulent purchase is made, such as over the internet, you are also free from liability for those charges. With the debit card you're also only responsible for $50 of unauthorized charges, but you must notify the issuer within 48 hours or you may be liable for up to $500. Further, if you fail to notify debit card issuer for more than 60 days after you receive your monthly statement with unauthorized charges, you could be liable for all the fraudulent charges. Visa and Mastercard have zero-liability protection available for debit cards, but this only applies to your debit card on transactions that do not require the use of your PIN
Since you know the difference now, you may be thinking - Which card should I use and when? Before we explore answer to this question, you have to understand that there is no right or wrong answer to this question. Sometimes it is just a matter o preference. However, there are is some common sense advice that you can follow to protect yourself. First of all, if you usually pay in cash for some of your purchases, you can use your debit card there. For example, it is a good idea to use a debit card for buying gas, shopping at the supermarket, or making other such purchases. But you should considering using a credit card if you're making online purchases or purchasing expensive items. Reason is simple. It is so much easier to dispute a charge on your credit card than on your debit card. A credit card issuer will put a charge in dispute when you call and not charge you any interest on it until a resolution is made. But you're out of money right away on your debit card and charge i not going to be reversed until a resolution is made.
Here are some of the important things to consider when choosing between credit and debit cards.
 Debit card is seen as a good alternative to carrying a checkbook every place. All the charges show up on your monthly statement eliminating the need to balance your checkbook.
Debit card are also a good alternative if you're traveling and need to write a check. Remember, some stores have a policy of not accepting checks over $50 from out of state customer. A debit card is a great alternative in cases like this. Also, Debit cards are more widely accepted than checks, making them perfect for travel.
Debit card is easy to get approved for. Since debit cards use your own money, not your credit, they're often easier to get than credit cards. For People who have bad credit or can not get a credit card due to other reasons, debit card is a good option. It offers exactly the same ease of look, feel and use as a credit card.
Debit cards are the only options for people who are compulsive shoppers and can't manage their spending well. Debit card will guarantee that they can not spend more than what they have in their checking account. So it can definitely help in managing your debt load.
Debit card is a great tool for rebuilding or establishing a credit history. Also, you can apply for extra debit cards for your spouse or partner if you have joint checking account. There is no need to reconcile charges twice since they all show up on the same invoice.
Credit cards offer a grace period to pay the money back as well as better fraud and consumer protection. If you pay your bills on time and pay them in full, a cash back or reward credit card can in fact be a useful tool in earning cash and/or rewards. Credit cards companies also offer 0% purchase to certain customer with good standing and you could use these offer to buy big ticket items without paying any interest. However, you need to be very careful with these offers. If you see even a slight risk of not able to pay back in time, just don't take it. Credit card companies make these offer counting on the fact that most consumer may not pay back in the time allowed.
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