|
Article:
Credit Card vs. Debit Card - What Are The Differences by: James H. Dimmitt 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
|
