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Is Debit Better than Credit?

The biggest difference between a debit card and a credit card is that with a debit card you make purchases funded directly from your own money that you hold in a bank account. With a credit card you don’t use your own money directly. When you make a purchase you do so using the card issuers money on the agreement that you will pay this back later.

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Credit Cards:

Credit cards essentially provide you a revolving credit line, accessible and available on demand, and payable every month, either in full or partially. The credit card issuer sets a spending limit which you should not exceed, under pain of stiff penalties and high interest charges. Normally, those who pay off their entire balance due for the statement period are not charged any interest. Credit cards do not remove your need to use money; they merely delay your parting with your money until the time comes to pay the card issuer.

Debit Cards:

Debit cards work like, and are usually linked to, your checking account. It is also possible to link debit cards to other types of deposits, e.g. mutual funds or savings accounts. In that respect, debit card are ATM cards. In the 1990s, the largest credit card brands arranged with banks to “co-brand” their ATM cards, so that you now have MasterCard and Visa debit cards. This is very convenient when you make purchases because, like their credit cards, MasterCard and Visa debit cards are accepted in millions of establishments worldwide. When used like this, debit card act like paperless checks. The card issuers do not extend you credit when you use debit cards; it is your money that pays the merchant, taken immediately from the linked account.