Debit cards are best compared to their cousin, the credit card. Historically, Americans had always favored credit cards over debit cards. However, as the technology necessary to complete debit card transactions became more prevalent, debit cards became the preferred plastic payment method.
The distinctions between debit and credit cards are very clear. Debit cards are used to spend money that you have in your checking account. Credit cards are used to spend money you do not have – you are expected to repay the credit card company later.
There are other differences, however:
- Debit cards can be processed as either a debit or credit card. Credit cards can be processed only as a credit card.
- Debit cards require that a customer enter a PIN at point of sale terminals. Credit cards require a signature and no PIN.
- Debit cards offer less protection in the case of fraud. Banks can hold customers liable for fraudulent purchases of up to $500. Credit card companies limit reported fraudulent liabilities to $50 or less. (This varies by bank, of course.)
- Credit cards offer better consumer protection. Credit card companies often provide extended warranties for goods you charge to your credit card. Credit card users will also find that credit card companies will work to resolve issues between vendor and consumer, allowing their customers to reverse charges when a vendor fails to keep up with their end of the bargain.
Debit Card Accessibility
Today, most banking customers have a debit card well before a credit card. Because debit cards allow you to spend only what you have in your account, a debit card is generally considered to be less risky to issue than a credit card. Banks often restrict debit cards to adults, unless an adult is also listed on the account.
Credit cards are available only to those who are 21 years or older (18 if the applicant has enough income.) Even still, credit card issuers usually require a certain level of annual income as well as credit history and a favorable credit score.
Photo by: DebtCovered
