What Are the Differences Between a Debit and a Credit Card?

Of course, debit and online credit cards have the same functions, but they have differences, too.

15:10 30 March 2022

If you're a consumer and make regular purchases, you have surely used debit and credit cards. Or at least you have been offered to apply for these cards. So, have you ever asked yourself what the differences between the two are? Of course, debit and online credit cards have the same functions, but they have differences, too.

 

You can use these cards for payments or purchases in different establishments and online payments. Both cards share almost the same layout and design in terms of appearance. When you look at these cards, you will find identical features such as card numbers, expiration dates, EMV chips, and magnetic strips. Although they almost look and work the same, there are significant differences between them. As an informed consumer, it's best to know the differences between the two. Understanding the differences can help you pick the best card for your needs and lifestyle.

 

Interest and Fees

If you choose debit cards over credit cards, you need not worry about annual fees. These may include fees for monthly maintenance, returned items, overdraft, or foreign ATM withdrawals. Withdrawals using your debit cards will not charge fees if done at your bank's ATM.

 

Meanwhile, credit cards usually charge fees for cash advances and interest rates. Also, if you avail of cash advances, you may not be given grace periods to repay your debts. Your debt will incur accrued interest once unsettled or unpaid after the due date.

 

Usage 

You can use both cards for online transactions with merchant outlets, websites, and even online casinos in the Philippines. Your account must have funds before approving a transaction when you use debit cards. You can charge your deposits with a credit card, but you need to fund it immediately as it will incur fees. But if you properly manage your credit card use for payments and gambling, it can help you boost your credit score.

 

Credit History

Credit cards allow cardholders to build a good credit history. However, improper and irresponsible use of credit cards could affect your credit report. Credit scores are calculated based on credit report information. So, delinquencies or late payments will keep your track record negative. But if you pay your bill on time and keep payments updated, you’re on the right track.

 

Meanwhile, debit cards don’t allow you to demonstrate to lenders that you are responsible for repaying borrowed money. So, you cannot build online credit history with this card type. 

 

Fraud Protection

In terms of fraud protection, cardholders can benefit much from credit cards over debit cards. However, loss or theft of debit cards should be reported within 48 hours of discovery. Otherwise, the cardholder will be held responsible for all losses. In addition, the liability of the debit card user increases to $500 after 48 hours.

 

Meanwhile, you should report the loss of credit cards promptly. One of the advantages of credit cards is their zero-liability insurance. And, their maximum purchase liability is $50 after the card disappeared.

 

Rewards and Bonuses

If you want to earn rewards, then a credit card is a better choice for you. A credit card is beneficial, especially for higher amounts of purchases. Online credit cards allow users to enjoy travel points, discounts, cash rewards, and other perks through rewards cards. Rewards may be at tiered rates or on a flat-rate basis. Take note that rewards have an expiration. So, be careful in choosing the rewards cards.

 

This is not made available to debit cards users. You will not earn rewards or points if you purchase using a debit card. However, you can also use the round-up feature in standard debit cards. Here, you can enjoy small amounts of money transferred to your savings account.

 

Overall, both credit cards bring advantages and disadvantages to users. For example, overspending through credit cards would lead to online credit because you spend the bank's money. Money needs repayment with interest and fees in a certain period. However, if you use a debit card, you will be spending your own money without fees or interest.

 

Credit cards are great if you are after rewards and building a good credit history. Credit cards also work best in terms of zero liability insurance. But, if you want to control and manage your finances, you should choose a debit card.