Credit Cards vs. Debit Cards
Do Debit Cards Offer As Much As Credit Cards?
Most people know what a debit card is, however, many people don’t understand the subtle differences between credit cards and debit cards. If you think that the only difference between a credit card and a debit card is how you pay for the purchases you make with them, you’d better think twice. The differences go deeper than that.
What is a Debit Card?
A debit card, also known as an ATM card, is a card that is issued by your bank. The card is linked to your checking or savings account. You can make withdrawals and deposits at ATMs with your debit card and if your debit card is a check card, you can also use it wherever credit cards are accepted to make purchases.
What is a Credit Card?
A credit card is attached to a line of credit issued to you by the credit card issuer. You can use the credit card to “charge” purchases against the line of credit.
The Differences Go Deeper Than That
Now that you understand the basic differences between credit cards and debit cards, it’s important to understand that there are also more important differences between the two. Credit cards generally offer more purchase protection than debit cards do. If your debit card number gets stolen, it’s like losing your checking account. If your credit card number gets stolen, you’re covered by the protection of Federal law and your credit card company’s dispute policies.
Under federal law, if someone steals your credit card, you’re only responsible for the first $50 of charges that the criminal makes. Oftentimes there’s additional coverage given by your credit card company so you’re not responsible for any of the charges. If they steal your debit card, you’re still covered by Federal law and are only responsible for $50 of the charges made, but that’s only if you report the theft within 2 business days. What if you don’t know about the theft until after the two days are up? Your responsibility can jump to $500. That’s a big difference.
When making online purchases, it’s probably better to use a credit card than to use a debit card. A credit card offers more protection, thereby making more sense.