Debit vs Credit
Debit Card
A debit card is linked to your checking account. Once you swipe and enter your pin, the money is deducted from your bank account in real time.
You may have noticed that you can also use the credit option when using your debit card. Selecting this option at the time of purchase does not suddenly turn your debit card into a line of credit you can borrow from. This purchase doesn’t require a PIN and the transaction happens offline. Once the merchant batches their receipts and reconciles them with the credit card company, your transaction goes through. This can take roughly two to three days. The credit option is not credit as nothing is borrowed from the bank, it’s your money.
Credit Card
When you use a credit card, you are actually borrowing the money from a bank to make a purchase with the intent to pay it back when the bill arrives. If you don’t pay your bill in full when it arrives, you will be charged interest which means that you will actually be paying more for your purchases.
Security
The issue of security should always remain a consideration when using both your debit card and credit card.
- With a fraudulent credit card purchase, the consumer’s liability is limited to $50 or less, if the fraud is reported within 60 days.
- For a debit card, acting fast limits your liability for charges you didn’t authorize. Report the loss or theft of your card as quickly as possible. Many companies have toll-free numbers and 24-hour service for such emergencies. Once you report the loss of your ATM or debit card, federal law says you cannot be held liable for unauthorized transfers that occur after that time.
- Because of the difference in fraud protection, if you are looking to use plastic, it’s best to use a credit card in a situation where a waiter or attendant takes the card from you. Also, use a credit card for phone and on-line purchases.