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Debit Cards VS. Credit Cards
Transcript of Debit Cards VS. Credit Cards
allows the card holder to make purchases on "Credit"
and pay for the items at a later day. Debit Cards is an electronic card issued by a bank which allows consumers to access their account to withdraw cash or pay for goods and services. Credit Cards VS. Debit Cards References In other terms: Card holder makes purchases on a line of credit (User is allowed to "pay later") Credit is the capacity to borrow money; it is also the maximum amount of money a lender is willing to lend to a customer. In other terms: At the time of purchase, cardholder is required to "PAY NOW!!" Although the withdrawal of funds appears to happen immediately, there is in fact a lag time during which the transaction is complete, but the funds have not left the card holder's account. The amount of credit available on the account is continually expanding and shrinking according how much the card holder is spending using the card and how much he/she pays off each month. If a person has a "low income" and a "poor history" credit; Bank assumes that extending credit is risky and as a result, charges a higher interest rate to offset risk. Each bank sets its own terms for the credit card it issues. A given bank may set different terms for different cardholder, according to their income and credit history. If person has a "high income" and a "good credit" history: Bank will rank customer safe to extend credit and will be offered a lower interest rate. Risks in owing a Credit Card The risks involved with owning a credit card are low. In case the situation where the card is stolen: When you are about to make a purchase and you are going to pay with a "card", the customer is asked "Credit or Debit"? What is the difference? Credit cards companies are held to strict liability laws: the law limits consumer liability for credit card fraud to $50. If the card holder notices any suspicious charges, the holder can send a written request within 60 days to the card company and the company is required to investigate the suspicious charges. If the customer chooses CREDIT: The transaction will be an "offline" transaction. When the system has verified the card and confirmed that there are sufficient funds in the consumer account, the customer signs the receipt. Transaction fee:
Offline transactions carry a fee of usually 2% of the total sale. Advantages to owning a Credit Card: Many credit cards offer such rewards such as cash back, travel, discounts at retailers and value-added services, like concierge. Credit cards are convenient especially for a large accounts/transactions. Customers are not really paying funds out of their funds and they do not have to pay until a few weeks after the monthly bill arrives. Credit cards are helpful for consumers who are seeking to establish or reestablish credit history. Responsible credit card usage can improve one's credit rating and improve chances of obtaining credit terms (low interest rates/low transaction fees,etc.) If the customer chooses DEBIT: The transaction will be an "online" transaction. Customer is then required to enter a PIN for electronic authorization. Once card is verified, the system has confirmed that there are sufficient funds in the customer's account. Transaction Fee:
A typical online transaction carries a fee of 7.5-10 cents. Risks in owning a Debit Card Debit cards carry a greater liability risk than credit cards. If it falls into the wrong hands and that person begins to make unauthorized purchases, the card holder may be held responsible for those transactions. Debit Card Fraud:
Liability is $50 if notified within 2 days
Liability increases to $500 after 2 days
After 60 days, liability could be up to your entire account To regain money: The holder of a lost/stolen debit card must persuade the bank to restore illegally spent funds to his/her bank account. Advantages in owning a Debit Card Debit Cards allow consumers to live within their means. Funds are drawn from an account where you have already deposited money into. It is YOUR money,
NOT the bank!!!!!! Riggs, T. (Ed.). (2008). Everyday Finance: Economics, Personal Money Management and Entrepreneurship (Vols. 2 - 2, pp. 367-376). Farmington Hills, MI: Gale. Bank of America Corporation. (2013). Debit Card vs. Credit Card: How Debit and Credit Cards Works. In Bank of America. Retrieved May 7, 2013, from http://learn.bankofamerica.com/articles/managing-credit/debit-cards-vs-credit-cards.html Lindsey, R. (2013). Debit Card vs. Credit Card: Which is Better. In In Charge Debt Solutions. Retrieved May 8, 2013, from http://www.incharge.org/military-money/story/debit-card-vs-credit-card Credit Card vs Debit Card (2013). In Diffen. Retrieved May 7, 2013, from http://www.diffen.com/difference/Credit_Card_vs_Debit_Card With Debit Cards; Debit Cards can also work as a Credit Card There is NO interest accumulated with Debit Cards Does NOT affect credit history Amount that can be spent equals your account limit. NO monthly bills Interview Which card is better for us students growing up? "It would be nice to have both a Credit and Debit card. A credit card for those emergency situations where you need money quickly to get out of problems." Since you have both a Credit and Debit card, which do you feel most accommodated? "Debit is more comfortable, you only worry about your own money" "With credit, it is useful when you want to buy something or to help you out and get out of trouble" Do you have any experiences with Credit Cards? Purchased a TV at the price of $125 With monthly bill payments and interests + Total cost of TV with Credit Card = $240 Do you have any experiences with Debit Cards? "I used my Debit Card very similar to Credit Card" "I use it to purchase products on both stores and online" "Debit can also be used to pay off bills/payment for services" "With Debit, its more comfortable and I don't have to pay high interests. Only little at cases." "With Debit, it is recommended to have money saved up in a savings account because with Debit, its your money" Debit Card Credit Card By: Jonathan Mendoza Which card is better depends upon how careful you are with your card and WHY you are using the card.