While they both look exactly the same and are supported by similar payment systems, Mastercard and Visa, there is quite the difference between a debit card and a credit card. Is there a difference between a debit card and a credit card? Well, let’s discuss the difference between the two commonly used forms of payment.
What is a Credit Card?
A credit card is a plastic card that is issued by a bank or credit card issuer, which makes it possible for the owner to borrow money from them to make purchases. When you use a credit card, you are borrowing money from a finite line of credit offered by a financial institution, depending on your credit limit. Your statement will specify the amount and details of your purchases each month, as well as the minimum payment due. If you do not pay off your credit card in full each month you will be charged interest on the money you owe. Credit cards are plastic cards (in standard wallet size) embedded with a magnetic stripe and a microchip that provide information to a credit card reading device depicting the account number, name, and address of an individual using the card.
What is a Debit Card
Your checking account is used as the source of funds for a debit card. A debit card withdraws funds from your checking account automatically whenever it is used. You can use this credit card anywhere a credit card is accepted by your bank or credit union when you open a checking account. A debit card is run at the point of sale in the same way a credit card is. To activate your new card, you need to set up a PIN, typically four digits. Some merchants will allow you to request cashback during the checkout process.