Credit Card Versus Debit Card Fine Points

Credit Card Versus Debit Card Fine Points

Credit Card Versus Debit Card Fine Points

English: ‘I’m Lovin It’ — HM1(FMF) Fred Turner swipes his gift card in McDonald’s new card machine, April 4. The new machine now allows customers to use debit, credit or gift cards to purchase food. (Photo credit: Wikipedia)

Credit Card Versus Debit Card Fine Points

Because your bank debit card has a Visa or Master Card logo on it you may be wondering just where the line is drawn or if it really matters.  Paying with the bank debit card means the money is immediately withdrawn from your account.  It does matter in several key respects that can be of critical importance. A credit card used properly helps you to enjoy the benefits of consumer protection laws that don’t come into play with a debit card.

Your bank used to issue you a debit card without a logo.  Only your credit cards carried the Visa or Master Card logo.  Because there are credit card versus debit card fine points you must not let the line become blurred in the way you use these cards.

Because a credit card is not tied to your bank account the money does not come directly out of the bank.  If you don’t pay the credit card bill when it becomes due your provider will be happy to charge you interest as well as a hefty penalty if you are late.  If you use your bank card as if it were a credit card the bank may extend credit to you for that transaction if you don’t have the money on deposit.  If you overdraw by even a small amount you will have to pay a hefty fee.  This fee is currently $35.00 with most banks.

Most Merchants Prefer Debit Cards

When the cashier asks you: “Debit or credit?” they are asking you how to process the transfer of funds.  Most merchants will prefer debit because their processing fee is less for this type of transaction.  When you say debit you will probably be asked to punch in your PIN.

To you its the same amount of money so what difference does it make?  There are federal consumer protections that come into play when you use credit cards.  You don’t have to pay for goods and services you don’t receive.  If the merchant goes bankrupt, fails to deliver or doesn’t perform as promised you don’t have to pay.  If a credit card is stolen you are usually liable for only the first $50.00 taken.  The limit on your liability is typically a lot higher for most debit cards.  If you have a dispute with a merchant your credit card company may have to help you resolve it.  Your bank is not required to do this.  Always use a credit card when renting a car.  If you rent a car with a debit card they will make a hard inquiry of your credit status which will result in a little damage to your profile.  Also they will tie up more than the rental value of the car from your bank account until after it’s returned as a form of damage deposit. Your credit card probably provides perks for car rentals.  Try the concierge feature when appropriate.  It’s free, fun to use and can be very useful in strange places.

And Then There are the Rewards

A credit card wisely used can earn you reward points while helping you to build your credit profile.  Month after month of timely payments as well as a low ratio of debt to available credit are the single most important factors in helping your FICO score grow from merely good into the excellent category.  It bears repeating that paying on time proves you are financially responsible.  Paying late results in high interest payments, penalties and a lower credit score.

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After practicing law for 37 years Edward F. St. Onge, Sr. now devotes all his time to helping consumers achieve a high credit score with amazing speed. Learn the counter-intuitive secrets to credit scoring through his down to earth instructions backed by extensive knowledge of the laws and trends. All of the latest tricks and techniques that they don't want you to know now at your disposal. At last a level playing field for the consumer!

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