Debit Cards Vs. Credit Cards: Advantages, Disadvantages, And Security Issues
Whether you rely on cash or credit to buy things, you must have a debit or credit card for emergencies. These cards have many benefits, including an unlimited number of transactions and a high level of security. What makes one card better than another? Learn more about which card is best for your needs in this article!
Debit card transactions are processed in real-time, unlike credit cards. This means that the money is taken from your account immediately, and the length of time it takes for funds to be transferred between banks can take a few hours or days.
A debit card also has an assigned PIN, automatically authorizing transactions when typed into a cashier’s terminal or ATM. The main difference between credit and debit cards is that debit cards draw funds directly from your bank account rather than giving you a line of credit to shop as much as you’d like with no repercussions on your finances.
A credit card is a payment card given to consumers as a payment processing method. It allows the user to purchase products and services based on the holder’s promise to pay for these items and any interest accumulating.
What is a credit limit?
A credit limit is the maximum amount that you’ve borrowed, or are allowed to borrow, from your loan provider. The amount will be written in your contract with them. The total amount of debt owed across all of your accounts must not exceed this figure, so it’s important not to apply for another loan when you’re close to this limit – as this could make some companies refuse you entirely or charge an increased interest rate on new loans.
The purpose of a credit card is to allow the cardholder to purchase items and services on credit rather than pay for them with cash or check. In contrast, debit cards withdraw money directly from the holders’ bank accounts. On its face, this makes it seem like debit cards might be more secure than credit cards – after all, if your account gets compromised with a debit card and you get robbed, then your bank will reimburse you for all of that money that was stolen.
Although some benefits to using a debit card instead of a credit card (such as not spending more money than you have in your account), many disadvantages and security issues are also associated with both types of cards.
Is a credit card better than a debit card?
Debit cards are a popular form of payment for many people, but they have their drawbacks. To use them, you must have money in the account linked to that card. If you are a fraud target and your debit card gets stolen, the money in your account can be quickly drained before you even know anything is wrong.
Credit cards provide additional protection by using a line of credit with funds that cannot be taken out without authorization from the issuer or that you don’t yet have available through payments on items like your cell phone bill or utilities. But what makes credit cards safer than debit cards? There’s only one answer — liability for financial losses.
The Game of Liability
Credit cards offer two major forms of protection that debit cards do not and one additional protection that’s still evolving. The first and easiest to understand are the credit card companies’ protections.
If you use your credit card for a purchase, you’re automatically given purchase protection on all purchases made with that card. If the item you purchased is not received or is received in a damaged condition, you can request a refund from the seller or use your chargeback rights, depending on how much time has passed since the purchase was made and what type of product was purchased. Some credit card companies also offer extended warranties on your purchases, which can save you money if something breaks or needs repair within the first year of purchase.
What if your card is lost or stolen?
While debit cards allow you to freeze your account and set up new security measures to protect your funds, this doesn’t provide any protection while the card is missing. The liability associated with using a stolen credit card depends on how quickly you report the card as stolen. In most cases, putting in a dispute against a purchase made with that credit card is enough to have that item reversed and requires the merchant to return the funds used for that transaction and sometimes additional funds depending on state regulations and merchant agreements.
The other form of protection is that the credit card company has a “first in time, first in right” policy for disputes. When the credit card company receives your dispute, it owes you a refund or replacement item if the dispute is upheld by its internal investigations team. And since the customer service department can provide you with real-time updates on how long it takes to investigate your claim, you can often decide whether or not to keep the purchase based on how long it’s taking for your claim to be processed.
Disadvantages of Using a Credit Card
The biggest disadvantage of using a credit card is giving up some of these benefits, such as not paying interest on purchases. Still, at the same time, you get a cash-back offer and possibly rewards if you make enough purchases over time. Once you give your card number to a merchant and the transaction goes through, there’s no way to cancel the purchase if you realize that you need more money in your account to cover the transaction. This is especially true if you use your credit card at an ATM – after entering your PIN and taking out cash, there’s no way to cancel the withdrawal simply by putting it back into the machine. You don’t have to worry about paying interest on any purchases that you make.
There are many ways for a person to steal another person’s credit card information. There’s a lot of financial information out there, and with the right tools, it’s easy for criminals to obtain someone’s credit card number.
Also, if the network gets compromised (like it did with Target), then many people can get hacked in one fell swoop. If your credit card gets hacked and someone goes on an online shopping spree using your number, then you might only know that it happened after they’ve already purchased $1500 worth of merchandise online, and you’re stuck paying for all of that stuff.
With a debit card, you have some extra protection against fraudulent charges because you’re only allowing them to take money from your account that they’ve already stolen from you.