{"id":355685,"date":"2021-11-17T10:00:00","date_gmt":"2021-11-17T17:00:00","guid":{"rendered":"https:\/\/www.creditrepair.com\/blog\/?p=355685"},"modified":"2022-04-18T13:29:19","modified_gmt":"2022-04-18T19:29:19","slug":"debit-vs-credit-cards","status":"publish","type":"post","link":"https:\/\/www.creditrepair.com\/blog\/finance\/debit-vs-credit-cards\/","title":{"rendered":"Debit vs. credit card: the major differences explained"},"content":{"rendered":"\n
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Disclosure regarding our editorial content standards<\/em><\/a>.<\/em><\/p>\n\n\n\n

If you\u2019re just beginning your financial journey, banking terminology may sound as intricate as medical jargon. When to use debit vs. credit cards, how to use them and what they even are prove to be confusing financial concepts for many.<\/p>\n\n\n\n

The good news is, understanding the basics of finances doesn\u2019t have to be complicated. Knowing the key differences between debit and credit cards, including how they work and when to use them, can help set you up for a bright financial future with excellent credi<\/a>t<\/a> habits<\/a> to boot.<\/p>\n\n\n\n\n \n \n \n \n \n \n \n <\/tr>\n \n <\/tr> \n <\/tbody>\n <\/table>\n\n\n\n

What are debit cards?<\/h2>\n\n\n\n

Debit cards, also known as bank cards, are payment cards that deduct funds from your bank account immediately upon usage. You must have enough money in your bank account to make a purchase with a debit card. Banks place an immediate hold on the money you\u2019ve spent, with the amount being deducted from your total balance usually within 24 to 48 hours. <\/p>\n\n\n\n

There are a few ways to add money to your bank account that you can spend with your debit card, such as depositing more money into your account. You can also transfer money to or from a savings account with the same bank or use an ATM to withdraw cash. Debit cards can also be used as credit cards<\/a> in certain scenarios.<\/p>\n\n\n\n

Pros of debit cards <\/h2>\n\n\n\n

Debit cards have numerous advantages that make them a great option for anyone just starting out on their financial journey, including these.<\/p>\n\n\n\n

Debt avoidance<\/h3>\n\n\n\n

One of the biggest advantages of debit cards is that money is withdrawn in real time from your account, meaning you avoid going into debt as you make purchases with a debit card. <\/p>\n\n\n\n

However, you run the risk of overdrafting your account if you make a purchase without having the proper funds\u2014so it\u2019s a good idea to always double-check how much money you have in your account before making a purchase. <\/p>\n\n\n\n

Easy access to cash and funds<\/h3>\n\n\n\n

Debit cards give you immediate access to your funds, as well as the ability to withdraw cash from an ATM\u2014but be cautious about using an ATM not associated with your bank, as you may be subject to fees. <\/p>\n\n\n\n

Limited fees <\/h3>\n\n\n\n

Debit cards have very limited fees associated with them, meaning you won\u2019t face interest charges, annual fees, balance transfer fees or other fees that are common with credit cards and can quickly add up. Debit cards do have some smaller fees, but more on that later.<\/p>\n\n\n\n

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Cons of debit cards <\/h2>\n\n\n\n

While there are certainly several advantages of debit cards, there are also some disadvantages to be aware of when using a debit card. <\/p>\n\n\n\n

Limited or no rewards<\/h3>\n\n\n\n

Many people seek out credit cards for travel reward points, cashback opportunities<\/a> and other perks that come with specialized credit cards. Most debit cards either have limited rewards programs or none at all, which may prove to be a disadvantage since some rewards (depending on how they\u2019re redeemed) can end up saving you money.<\/p>\n\n\n\n

No option to build credit <\/h3>\n\n\n\n

Good credit can open up a lot of opportunities, such as better housing options and access to credit cards with special rewards. Debit cards cannot build credit for you with each use, meaning that even if you have excellent budgeting skills and save more than you spend each month, it won\u2019t be reflected in your credit score.<\/p>\n\n\n\n

Sneakier fees<\/h3>\n\n\n\n

Many debit card users are unaware of the fees that come with debit cards and are surprised when they\u2019re charged. Some of the lesser-known fees that can frustrate debit card users include:<\/p>\n\n\n\n

Debit vs. credit cards: an overview<\/th>\n <\/tr>\n
<\/th>\n Money comes from:<\/th>\n How many are recommended:<\/th> \n Monthly fees:<\/th> \n Best for:<\/th> \n <\/tr>\n <\/thead>\n
Debit card<\/td>\n Your checking account<\/td>\n 1<\/td>\n None required<\/td>\n Day-to-day purchases, such as groceries or dinner<\/td>\n <\/tr>\n \n
Credit card<\/td>\n Your credit card lender<\/td>\n 1 to 3<\/td>\n Minimum monthly payments and interest fees required<\/td>\n Larger purchases that can be paid off in smaller payments, like plane tickets<\/td>\n <\/tr>\n