Debit and Credit Cards

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Accountants aren’t the only ones who need to know the difference between debits and credits. That’s especially true when your answer to the advertising slogan “what’s in your wallet?” is not limited to just one type of plastic.

Here’s a brief comparison of debit and credit cards.

Debit Cards
Credit Cards
How it works Money for purchases is withdrawn from your account immediately Like a loan. There’s no interest when you pay off the full balance within a "grace" period. You’ll pay interest when you make repayments over a longer term.
When to use
  • Small purchases where you might otherwise use cash
  • Buying foreign currency during overseas trips
  • When you’re unable to qualify for a credit card
  • For online purchases
  • At hotels or other businesses that put security holds on funds
  • When you can get a reward for purchases you’d make anyway
What to watch out for
  • Using cards linked to cash accounts with high balances
  • Overdraft fees
  • Annual fees
  • High interest rates
Liability limits
  • $50 limit if you notify your bank within 48 hours of discovery of unauthorized debits
  • $500 if you notify your bank within two days
  • Unlimited liability after 60 days
Zero to a maximum of $50
Statements For bank-issued cards, the transactions are shown on your monthly statement The card company will send you a monthly statement

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