Debit Card vs. Credit Card, What Are The Differences ?

Ah, the "good old days". If you are a baby boomer, like me, then you probably remember how important it was to rush to the bank on payday. You had to get there before the teller lanes closed so that you could have your "cash allowance" for the week. Otherwise, if you needed cash you had to write a check, then go to the bank, and "cash" the check for real cash.

Fortunately the days of the mad rush to get cash from the bank are long gone. We now enjoy the convenience of using a nearby automatic teller machine (ATM) or you can even get "cash back" at your local grocery, hardware or convenience store.

The card you use at the ATM is known as a debit card. When debit cards first appeared it was easy to tell them apart from credit cards. Debit cards didn't have a credit card company logo on them; instead, they usually just had your bank name, your account number and your name.

Today debit cards look exactly like credit cards even carrying the same logos. Both types of cards can be swiped at the checkout counter , used to make purchases on the internet, or to pay for the fill-up at the gas pump.

When you use your debit card to make a purchase, it's just like using cash. The account that is attached to your debit card, in most cases your checking account, is automatically debited when you use your debit card. The cost of your purchase is deducted from the funds you have in that account.

On the other hand, when you use your credit card to make a purchase you are using someone's else's money, specifically the issuer of the credit card, usually a banking institution.

In effect, you agree to pay them back the money you borrowed to make your purchase. In addition you will also pay interest on the money "loaned" to you at the rate which you agreed to when you applied for their credit card. This is known as the annual percentage rate (APR).

While the two cards might act and look alike, the levels of consumer protection that each type of card provides can be different.

Under federal law, if someone steals your credit card you're only responsible to pay the first $50 of unauthorized charges. However, if you notify the credit card issuer before a thief is able to make any charges you may be free from all liability. If the credit card is not physically present when an unauthorized or fraudulent purchase is made, such as over the internet, you're also free from liability for those charges.

MasterCard and Visa offer zero-liability protection where you won't pay any charges if someone uses your credit card to make an unauthorized purchase.

The protection offered to debit card fraud is similar but with a few exceptions. For example, your liability under federal law is limited to $50, the same as for a credit card, but only if you notify the issuer within two business days of discovering the card's loss or theft. Your liability for debit card fraud can jump up to $500 if you don't report the loss or theft within two business days.

And if you are the type of person that gives a passing glance to your monthly bank statement, you could be totally liable for any fraudulent debit card charges if you wait 60 days or more from the time your statement is mailed.

Visa and MasterCard zero-liability protection applies to your debit card but only for transactions that do not involve the use of your PIN (personal identification number).

Additional protection against fraudulent use of your credit or debit cards may be available through your homeowner's or renter's insurance. Check your policy or with your agent for more information about your coverage.

Also be aware that you should contact your card issuer by certified letter, return receipt requested, after you've contacted them by phone to protect your consumer rights.

As for which card to use for what type of purchase, most experts agree that you should use your debit card for the same type of purchases you'd make as if you were using cash. Therefore, it makes more sense to use your debit card than your credit card at the grocery store or gas station (provided you have sufficient funds to cover these purchases of course).

Avoid using your debit card for any online purchase or for something which is expensive. Why ? You'll find it much easier to dispute a charge when you use your credit card. If your gold-plated, limited edition, hip-swinging Elvis wall clock arrives broken, your credit card company will remove the charge until the problem is resolved.

With your debit card you are stuck dealing with the merchant directly to resolve any problems with a purchase, even if your banking institution could really use a gold-plated, limited edition, hip-swinging Elvis wall clock of their very own.

© 2004, www.yourfreecreditreportnow.com
Author: James H. Dimmitt.
James is editor of "TO YOUR CREDIT", a weekly free newsletter. Subscribe to the newsletter by visiting http://www.yourfreecreditreportnow.com.

---

UPS Delivers the Goods, Your Identity

Well now we add CitiGroup and UPS to the Identity... Read More

Consolidating Credit Cards

Credit card consolidation is a popular solution for those with... Read More

What You Need To Know About Credit Cards

What is a credit card? A credit card is... Read More

Special Credit Information for Married Couples

If you are married, establish separate credit accounts.Try to finance... Read More

Commercial Collections: Business Finance Booster Shot

Commercial collections: fixture of the new B2B cultureIf you're in... Read More

Credit Card Incentives

Credit card companies want your business. After all, lending money... Read More

Cash Advance ? How Does It Work?

If you want a cash advance or a payday/paycheck loan,... Read More

Identity Theft ? Who Would Want Mine?

With all my bills who would possibly want my credit?... Read More

Credit Report ? Look Out for Your Debit Report, Too

Most consumers are aware that there are companies that keep... Read More

Stop Credit Card Offers

You can stop receiving credit card offers in the mail!... Read More

Avoiding ID Theft and Credit Fraud

Article excerpted from the new book, "How to Do Space... Read More

New Credit Advice: Dont Pay off Those Credit Cards!

Credit needed for real estate mortgage financing differs from credit... Read More

Avoiding College Credit Card Traps

Congratulations college freshman! You're about to embark on one of... Read More

5 Surefire Ways To Eliminate Credit Card Debt

Do you have enormous credit card debt? You are certainly... Read More

How To Choose A Credit Card

Your credit score may just be a little number, but... Read More

Why Consumers Need a Nationwide Credit Freeze NOW

What do a shoe retailer, an online discount broker, and... Read More

Types of Credit Cards

There are a whole variety of different types of credit... Read More

Defeating Credit Card Debt With Self Control

Credit card debt is a major social problem in some... Read More

Minimum Credit Card Payments to Rise

For years, major credit card companies have allowed cardholders to... Read More

Credit Traps Snag Consumers

Nearly 20 years ago I worked for a small consumer... Read More

Which Credit Bureau Should I Use To Check My Credit Report?

There are three main credit bureaus in the United States;... Read More

What Should I Do If I?ve Become a Victim of Identity Theft?

Identity thieves take advantage of everyday opportunities to discover your... Read More

Making Sense of the Information in Your Credit Report

If you've ever applied for a credit card or loan,... Read More

What is a Credit Card?

A credit card allows you to buy things even though... Read More

Give Yourself Credit

The Beginning of the Credit Card EraIn 1951, Diners Club... Read More

Compare Credit Card Offers and Reward Yourself

Here's a simple system on how to pay zero interest... Read More

Credit Score - Reporting Your Financial Health

Credit score is one of the most basic, determining factor... Read More

Credit Reports Inside and Out

The Credit Report is like your scorecard in the lending... Read More

Beware of Falling Minimum Payments

If you opened a credit card statement recently and were... Read More

Sound Advice For First Time Credit Card Users

If you are just entering the world of credit cards,... Read More

How to Get Credit Reporting Agencies to Help You

The process of clearing credit can be laborious and frustrating.... Read More

Simple Identity Theft Protection

How many of you bank, shop, or transact other business... Read More

Fun with Credit Cards

For those of us who know how to use them... Read More