Word of the Week 'Debit Cards, Credit Cards'


BY MARK P. CUSSEN

You probably have at least one credit card and one debit card in your wallet. The convenience and protection that they offer are hard to beat, but they have important differences that could substantially impact your pocketbook. Here’s how to choose which one to use when you need to swipe the plastic.

They Look Alike, But They’re Different

Credit and debit cards typically look almost identical, with 16-digit card numbers, expiration dates and PIN (personal identification number) codes. But that's where the similarity ends. Debit cards allow bank customers to spend money by drawing on funds that they have deposited at the bank. Credit cards allow consumers to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash.

Credit cards are issued in four categories:

  • Standard cards simply extend a line of credit to their users.

  • Rewards cards offer cash back, travel points or other benefits to customers.

  • Secured credit cards require an initial cash deposit that is held by the issuer as collateral.

  • Charge cards have no preset spending limit, but often do not allow unpaid balances to carry over from month to month.

All of them they generally work with your signature.

Not so for debit cards. Some debit cards require using a PIN for every transaction, while others allow the customer to use a signature instead.

  • Standard debit cards draw on your bank account.

There are also two types of debit cards that do not require the customer to have a checking or savings account: