With a credit card, the holder can borrow money from the financial institution, which issued the card.
We all use credit and debit cards to shop for everything — from groceries to clothes. But in this digital and interconnected world, are you still confused about debit and credit cards? If yes then you have landed on the right article.
Both the cards whether credit or debit are equipped with 16-digit card numbers, expiration dates, magnetic stripes, and EMV chips, hence they are similar in appearance. Despite similarities, these cards work quite the opposite way. With the use of debit cards, you can make purchases using money that you have saved in your bank account. With credit cards, you can borrow money from the card issuer up to a predetermined maximum limit to make purchases or cash withdrawals. Both credit and debit cards provide unrivalled convenience and security, but they also have significant differences that could have a big impact on your wallet. Here’s how to select the best one to suit your needs:
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Credit Cards
With a credit card, the holder can borrow money from the financial institution that issued the card, which is usually a bank. According to the conditions set forth by the institution, cardholders consent to pay the money back with interest. There are many different types of credit cards available:
Standard credit cards frequently have no annual fees, and they simply extend their users a line of credit to be used for purchases, debt transfers, and/or cash advances.
Premium credit cards come with benefits like concierge services, access to airport lounges, special event access, and more, but their yearly fees are typically higher.
According to customers’ spending patterns, some rewards are also given like cash back, travel points, or other advantages. Credit cards with low introductory interest rates offer only debt transfers. While a
Secured credit cards demand a down payment in cash that is kept as security by the card’s issuer. On the other hand, Charge cards lack a defined spending cap but frequently forbid the carrying over of unpaid balances from one month to the next.
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Debit Cards
When a consumer uses a debit card to make purchases, the money is taken straight out of their checking account rather than being borrowed from a bank or card issuer. When given by significant payment processors like Visa or Mastercard, debit cards offer the same convenience as credit cards as well as consumer protections.
In addition to one standard type, two kinds of debit cards do not demand that the user must have a bank account. State and federal organisations issue electronic benefits transfer (EBT) cards so that qualified users can use their benefits to make transactions. People without access to a bank account can use prepaid debit cards as a way to make electronic purchases up to the amount that was preloaded onto the card.
