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.

BBC News
Ex-Credit Suisse brokers indicted on fraud charges
Financial Times, UK - 7 hours ago
By Joanna Chung in New York Two former Credit Suisse brokers have been indicted on fraud and conspiracy charges related to the sale of auction rate ...
Former Credit Suisse broker arrested in US Swissinfo
Former Credit Suisse broker charged with subprime-linked fraud in ... International Herald Tribune
UPDATE 1-FBI arrests ex-Credit Suisse broker Reuters
Sofia Echo - Reutersall 490 news articles

CEP News
S&P raises Nalco Co.'s credit rating
CNNMoney.com - 9 hours ago
NEW YORK (Associated Press) - Standard & Poor's on Friday upgraded its corporate credit rating on Nalco Co., citing bright prospects for the company to ...
S&P puts Fifth Third on credit watch Dayton Daily News
Credit rating soars in District 300 Northwest Herald
Starbucks downgraded to 'BBB' on weakening credit metrics - S&P Hemscott
CNNMoney.com - CNNMoney.comall 106 news articles

Indianapolis Business Journal
Federal housing tax credit has mixed benefits
Indianapolis Star, United States - 56 minutes ago
By Jeff Swiatek At Carpenter Realtors in the Indianapolis area, agents wear lapel buttons proclaiming, "Ask me about the $7500 tax credit. ...
Perk helping home sales Indianapolis Business Journal
all 3 news articles

Methanex to Present at Credit Suisse Chemical and Ag Science ...
FOXBusiness - 9 hours ago
... 2008 (MARKET WIRE via COMTEX) ----Methanex Corporation (TSX: MX)(NASDAQ: MEOH)(SANTIAGO: Methanex) will be presenting at the upcoming Credit Suisse ...

Mexican Banking Group Ixe In Credit-Card JV With JPMorgan
CNNMoney.com - 7 hours ago
(JPM) to set up a credit-card joint venture in Mexico . In a filing with the Mexican Stock Exchange, Ixe said its bank subsidiary Ixe Banco SA and CMC ...

When the Bank Closes Your Credit Account
Washington Post, United States - 11 hours ago
By Joan Goldwasser Q I received a notice from Capital One that it is closing my credit card account because of inactivity. If the company closes the account ...
Capital One Spurned Mortgages For Credit Cards - CFO CNNMoney.com
all 3 news articles

Bankers: Tighter regulations contribute to credit crunch
Bizjournals.com, NC - 9 hours ago
To the list of culprits behind the credit crunch, you can now add one more: stricter exams by banking regulators. Bankers and their attorneys say that ...

Fear factor: Obama, McCain and the credit crunch
Los Angeles Times, CA - 9 hours ago
... John McCain nor Barack Obama -- was dare to say how they will solve the most serious economic problem facing the country: the deepening credit crunch. ...
Obama, McCain, Fannie and Freddie: A Troubled Love Story Wall Street Journal Blogs
all 3 news articles

Credit Crunch: The Sequel
U.S. News & World Report, DC - Sep 4, 2008
And that certainly seemed to be the case in March when investment bank Bear Stearns became the highest-profile victim of the credit crisis. ...
UPDATE 1-US banks' direct borrowing hits record in week Reuters
UPDATE:Comml Bks Set Record For Avg Discount Window Borrowing FXstreet.com The Foreign Exchange Market
How to Fix It: Take the Fed Public Mother Jones
BusinessWeek - The Associated Pressall 79 news articles

Minyanville.com
As the Credit Strains Linger, Pimco’s Gross Calls for Intervention
New York Times Blogs, NY - 19 hours ago
Banks and businesses are still having trouble raising money, according to data on Thursday that reinforced the prospect that the year-long US credit crisis ...
Freaky Friday Potpourri: Help Wanted in Washington! Minyanville.com
Pimco's Bill Gross hits the panic button BloggingStocks
'Financial Tsunami' To Engulf Markets, Says Pimco's Gross Evening Bulletin
Bloomberg - Reutersall 39 news articles

Wind Chimes and more...

Windchimes for great gifts!

Credit Report ? Check Yours Regularly - and for Free