Credit Card and Debit Card: What’s the Difference?

When you go shopping, you often hear the person at the cash register ask this question: “Credit or debit?” The question, which basically asks whether you want to charge the purchase on your credit card or your debit card, seems to be quite confusing for some people. For some shoppers, a debit card and a credit card are simply plastic cards that they use to make purchases. So, what really is the difference between a credit card and a debit card?

Credit card: the money that you owe

When you charge your purchases to your credit card, the party that actually pays the merchant is the credit card company. Instant money, right? Well, not exactly. Charging purchases on your credit card is basically your way of asking the credit card company to cover your expenses while you are still saving up for the payment. You are required, therefore, to pay back the credit card company for temporarily lending its funds. So don’t get carried away by the purchasing power of the credit card. You might get disheartened when you receive your credit card bill.

Debit card: the money that you have

You can use your debit card in two different ways: either by withdrawing money from an ATM or by charging transactions to your account. Charging purchases to a debit card, however, is different from charging them to a credit card. When you charge purchases to your credit card, the bank pays the merchant. Your duty, therefore, is to repay the bank for the generous loan. But when you charge purchases to your debit card, you don’t need to repay the bank afterwards. The funds used to pay for the charged items, after all, were all taken from your savings account. Using your debit card to make purchases, therefore, is just like spending the money you have now. So if you do not have enough funds on your savings account, then expect the person at the cash register to reject your debit card.