They look the same, they work in a similar way when purchasing, they are both convenient –but what are the key differences between credit and debit cards? Let’s take a look…
The main difference of course is where the money comes from. With a credit card you are accessing a loan and not your own funds. Being a loan this must be repaid on time otherwise there will be interest charges and other fees. cvv shop Debit cards access your own money and therefore there will be no interest charges accruing. Credit cards allows ‘buy now, pay later’, debit cards don’t.
The benefits of debit cards are the convenience of easy access to your money but this makes it susceptible to theft and the decimation of the balance in your account. This will depend on how quickly you advise the bank of the loss. After you have notified the card provider you will be liable for the first $50. If you do not advise the bank you will be liable for the total loss. Credit cards are ruled by strict laws which limit your liability to $50. If you have notified the provider that your account number has been stolen there is no liability on your part. This is a key difference.
As well as having stricter liability laws, buy cvv credit cards also offer more consumer protection on purchases. Using credit cards for very large items or for purchases that are to be delivered to your home will give you added insurance in case the goods are damaged en route.
For the merchant, the main difference between debit and credit is related to the fees but these do not usually affect you as the card holder. However, recent changes in New Zealand and Australia mean that merchants may now pass credit card charges on to the card holder.
The difference for you between debit and credit can actually be quite significant. Usually debit transactions have a daily limit whereas credit cards do not. This makes credit cards more useful for making large purchases. If you were to use your debit card for the purchase it may be declined even though money is available.
A credit card is a way of getting a credit history whereas this is not so with debit cards. Responsible use of credit can reinstate a credit rating and goes towards creating a good credit history. In the same way it can help to destroy your credit rating through poor use and not paying on time.
So there you have it — the key differences between credit and debit cards.
Lyn Bell has been in the finance industry for more than 30 years and is a Certified Financial Planner. She has helped many clients achieve their financial goals. Sign up to get Lyn’s free newsletter SoundFinance News and receive a free gift.
Please note this article does not contain specific advice and is for information/education purposes.
A disclosure statement is available free on request.