Both credit cards and debit cards are rectangular in shape. They both have a 16-digit card number, an expiration date, and a pin code. But beyond that, they function very differently.
What is a debit card?
To put it simply, a debit card is a card that allows you to transfer money from your banking account when making a purchase.
This is because a debit card takes the money you already have out of your transaction or savings account to pay for these purchases. If there’s no money in your account, you simply won’t be allowed to make the transaction.Debit cards go by many different names: ATM cards, EFTPOS cards, Keycards, Cash cards and more. Whatever it is you call them, they are an effective way to shop in store or online without the added fear of going over your budget. With a debit card, you only spend what you have, and nothing more.
What is a credit card?
A credit card is something Canstar has written extensively about – you can read all about this form of payment and compare different providers on our website here. Credit cards give the holder access to an unsecured revolving line of credit, allowing them to make purchases up to a specific credit limit.
Credit card users have a certain period to repay the money owed in full, or they have to repay what they owe plus interest. For some cards, interest is charged on all purchases and transactions from the day the transaction is made.
Credit cards can be extremely useful for people who have tight control of their finances. If you’re in-between pay days, then credit cards can give you a buffer for any purchases you need to make until your money arrives. But, it’s worth remembering it can be easy to fall into a trap with credit cards, so make sure you’re keeping a close eye on any debt you accumulate.
There are several different types of credit cards too, each of which offers different benefits to the holder:
What’s the difference between a credit card and a debit card?
Different payment methods suit different situations, which is why many people use credit cards and debit cards. The primary difference between the two can be summarised into the following sentence:
“A debit card is used for spending your own money from your bank account, while a credit card allows you to borrow money and repay it later”
The table below shows a comparison of the pros and cons of using credit cards and debit cards.
Credit card v debit card – pros and cons
|Credit Cards||Debit Cards|
If you’ve decided a credit card is the right option for you, you can compare your options with Canstar.
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