Monday, 16 Sep 2019

Understanding the use of Debit and Credit Card

It is common nowadays for people to not carry cash on their wallet or purse. They are now comfortable in using a debit and credit card (commonly known as “plastic”) to pay for purchases and services or for anything else that needs to be paid. One of the general consensuses is that using debit and credit to pay for expenses is a lot safer than carrying a wad of cash in your pocket. But do we really understand the different uses of a debit card and credit card? The general purpose of these cards is simply to be used to pay of expenses. However there are differences relative to using plastic.


Common Function and Difference in Using Debit and Credit Card


The common use of both plastic is that they are accepted in every establishment that offers goods and services. The difference on the hand is using a credit card to pay off an expense is a form of Borrowing money from the credit card provider while a debit card is a form of a pre-paid card wherein it has a stored amount of money which would normally comes from your saving.


Other Distinct Differences


Debit card is actually an extension of your savings account. So whatever amount of money you have on the account is the pre-paid amount you have on the card. The limit therefore of debit card is based on how much money you have on your savings. Each time you use a debit card to pay off expenses, the amount is immediately and automatically deducted from your savings. Credit card on the other hand is quite the opposite. There is no amount stored on the card nor can you deposit money on it. Credit cards have a line of credit amount which you can use but using it would be a form of borrowing that you would have to pay fully or partially at the end of each month. Also since the use of a credit card is a form of a loan, there will be an interest incurred on the ending balance of the credit card.