Debit Cards vs Credit Cards…Do you know the difference?

Debit cards are directly linked to your checking account. When your card is swiped the money is taken directly out of your account. Now the tricky think about debit cards is that your money does not leave your account right away. Many times the withdrawal can take up to 3 days to occur. Also what people do not know is that when you enter a pin number into the terminal, the transaction will be considered as a foreign ATM withdrawal and an additional fee usually occurs. With that being said, most people love their debit cards and prefer to use over a check. Debit cards are convenient and unlike credit cards are interest-free. In fact, Visa reports that there are over 400 million debit cards in use today across America.

There are times, however, when you should use your credit card:

Major purchase and online transactions

A consumer should use a credit card because it will offer greater protection if something negative should happen; such as the product not being delivered. Most credit cards have an automatic insurance protection plan.


When your server takes your card is leaves your sight, a major security breach in itself. There have been reports that servers have added additional tips without disclosing to the diner. It is better to have a wrong purchase on a credit card where transactions can be reversed, whereas a bad debit card transaction will affect your actual cash in hand.

Car and Hotel Reservations

Rental car companies and hotels usually place a hold on funds that are greater than the actual cost of the rental period. After the final bill has been produced these organizations can take up to a week to release the remaining balance, again affecting you cash in hand.

Automatic Payments

Using a debit card for monthly bills that vary month to month can be dangerous. If a mistake occurs, it is up to you to get your money back. As a former banker, I have seen mistakes on phone bills that were $500 greater than the actual bill. The customer had $500 deducted from their checking account, causing a negative snowball. Because of the $500 deduction, she had 3 other checks returned; the entire mistake cost my customer an additional $150. Now the mistake was corrected money refunded but the entire ordeal took 2 weeks to be cleared up.

I know you may not be able to use a credit card in all of these examples. But if you can, you will be able to minimize your exposure to lost money and ID theft!