Differences between debit and credit cards

Posted by Felix Okoli on Thursday October 17, 2013 at 12:19:23:

A credit card is a plastic card issue by banks or financial institutions to a customer, and used for making payments. It allows the holder or user to make payment and purchases for goods and services, without actually having the money. It gives the account holder the option to borrow money which is to be paid back in the future. The money is to be paid back in a future date with interest. There is no limit to the amount you can use from your credit card, but in as much as you service the interest at the appointed time, you are good to go

While a debit card is a card issued also by a financial institution, which allows the customer to transfer money from His or Her own account to another person’s account through an electronic medium. They come in the form of ATM cards and are used for transactions such as payment for goods and services via electronic means, withdrawal of cash via ATM machines etc.

Now that we can define the meanings of a credit card and a debit cards, let us talk about there major difference.

SIMILARITIES BETWEEN A DEBIT CARD AND A CREDIT CAR
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- Both are issued by financial institutions

- Both of them come in form of plastic cards

- Both of the cards attracts interest rates

- Both of the cards are used electronically to make payments and purchases.

DIFFERENCES BETWEEN A CREDIT CARD AND A DEBIT CARD:
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- One major difference between a credit card and a debit card is that, in a debit card, you have money available in your own account, you just transfer the money to pay for goods and services, while in the case of a credit card, the holder does not have any cash in the account, but He or She is taking a loan from the financial institution, which would be repaid in the future.

- In credit card transactions, your signature may be required, while in a debit card, you Personal Identification Number(PIN ), issued by the financial institution is all that is required for such transactions

- Credit cards attract huge interest rate which the card holder is expected to pay within a certain period of time, while debit cards may attract charges but they are not as high as the interest rate of a credit card.

This article have covered the issue of what a credit card is and what a debit card is and there differences. But it is always advisable to go for a debit card.