Complete A Credit Card Application Or Just Use A Debit Card?

It may be hard to distinguish a debit card from a credit card. After all, they look the same. Same logo, same magnetic stripe on the back, same size even. But even though they are physically similar, debit cards and credit cards are very different. Before you use them, you should be aware of the positives and negatives of each. Before you complete your application for a credit card, you should know whether or not you would be better off using a debit card.

The name is the first thing you might notice that is different. A ‘Debit’ is a debit against your banking or savings account. Any time you use it, that amount will be deducted from your account. A credit card is more like a loan that you pay back later, usually at the end of the month. There are fees and interest rates associated with it also.

Debit cards require more discipline. You have to constantly monitor the available funds in your checking or savings account. Whereas credit cards offer instant gratification and you don’t have to keep careful track of your everyday purchases. There are other important differences to consider though.

Credit and Debit: Difference In Liability

The amount of liability is a significant difference. There are strict liability laws that credit cards are subject to. In the case of fraud, the consumer would be liable for $50. If you happen to notice a suspicious charge on your card, the credit card company has to investigate the charge within 60 days of the request made by the consumer.

In the case of debit cards, the liability to you is $50, but you must notify the bank within two days of noticing suspicious activity on your card. After two days, your liability jumps to $500. And if you wait more than 60 days, you are liable for the entire balance. The plans are being adjusted by banks somewhat to limit the consumer’s liability, but it is not required by law. And it is not foreseen that debit card providers will be changing their policies anytime soon.

Most of this information should be available on the credit card application. If not it is usually sent to you shortly after your card has been issued. If you are filling out a credit card application online this information should be found either on the same form or with a link to another section.

How Your Card Is Protected

If you happen to purchase poor quality or damaged merchandise with a platinum credit card, you may withhold payment due to the Fair Credit Billing Act. The credit card company may also act on your behalf and investigate.

With debit cards, however, the amount of purchase is deducted immediately from your account, so no payment can be withheld. And if a merchant decides to refund your money, you may only be offered store credit or a gift certificate.

You Choose When to Pay with Your Bank Card

With the debit card, you pay now. With the credit card, you pay later. If you have too much debt on your credit card, your debit card will help keep you on track. You just can’t spend what you don’t have.

If you have enough self-discipline though and can resist using your credit card, you might consider using one. There are many cash back rewards credit cards, point rewards credit cards, frequent flyer credit cards, gasoline credit cards and hotel credit cards that offer rewards, cash back, or discounts towards a variety of travel and retail purchases. All you have to do is pay off your balance in full every month without carrying anything over. You would never want to lose money in interest charges.

Banks and credit unions will usually issue you a debit card/ATM card, so you’ll have the option of either. Your preference should depend on your needs and how you manage your finances. Some banks even offer points rewards for using a debit card. The cash back and points rewards system may not be the same as the best credit cards. In some cases though, if you factor in interest payments there may not be a noticeable difference.

When to Use Credit and When to Use Debit

Both credit cards and debit cards work better for different things. It mostly depends on you though. Do you pay off your balance quickly? Do you have a large amount of debt? Here are some things to consider:

Debit Card - if you use it for everyday items (groceries, gas, etc.), you will avoid paying interest on your card balance. However, if you earn rewards, this is a disadvantage.

Credit Card - use for things purchased online or by mail. You will be more protected this way. You could also use it for more expensive items if you need time to pay it off.

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