Cards - Types - Credit Card, Debit Card - Advantage and Disadvantage of Cards - Full Details

Card [credit/debit] - 

Credit cards and debit cards typically  look almost identical, with 16-digit card numbers, expiration dates and personal identification number (PIN) codes. 

But the difference between debit & credit card is that Debit cards allow bank customers to spend money by drawing on funds 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:

A credit card is a card issued by a financial institution and it enables the cardholder to borrow funds from institution. 

Cardholder agree to pay the money back, with interest, according to the institution's term.

Credit card 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 deposite.

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

Adantages of Credit Card -

Purchasing Power - Credit Cards enable users to make big ticket purchase they might not otherwise be able to afford.

• Rewards - : Many cards offer rewards programs that will accure points, discounts or other benefits like frequent flyer miles.

• Convenience - : Credit cards reduce the need to carry cash. Most retailer accept credit cards and they are pretty much required for online purchases.

• Traceability - : The electronic record keeping that comes with credit cards makes it easy to track your spending and identify fraud.

• Use during an emergancy - : There are times when money is the simple solution to an emergancy. If you get hit with an unexpected expense, credit cards can be the quick and easy solution you need.

Disadantages of Credit Card - 

• Overspending - : Credit cards can make life easier, but they can also make overspending easier as well. With a credit card, you're spending money you don't necessarily have yet. If you're not careful, this can be quickly lead to unexpected debt.

• Interest and fees - : Using credit is essentially borrowing, And you're not borrowing for fees. Mismanaging a credit card can lead not only to a high balance or maxed-out card, but also to debt in the form of interest and fees.

• Fraud - : Credit cards (and other electronic forms of payment) carry unique dangers. Credit cards can be stolen, their number can be copied and they can be used to steal your money and identity.

• Mounting Debt - : If you carry a balance on your credit card from month to month, it can be easy for charges and interest to rack up. Many don't expect credit cards to be gateways to extra debt, but if you're not careful, that's exactly what happens people.

Debit Cards:

A debit card is a payment card that deducts money directly from a consumer's checking account to pay for a purchase. 

Debit cards eliminate the need to carry cash or physical checks to make purchases directly from your savings.

There are also two types of debit cards that do not require the costumer to have a checking or savings account, as well as one standard type:

• Standard debit cards draw on your bank account.

• Electronic Benefits Transfer cards are issued by state and federal agencies to allow qualifying user to use their benefits to make purchases.

• Prepaid debit cards give people without access to a bank account a way to make electronic purchases up to the amount that was pre-loaded on the card.

In addition, some debit cards - particularly those issued by payment processors, such as Visa or MasterCard - are starting to offer more of the protections enjoyed by credit card users.

Debit can funtion in two ways : 

• Like an ATM card for immediate withdrawals of cash-

• Like a check when buying an item. Them money used to pay for the transaction is usually deducted from your account within a day or two depending on when the retailer presents the transaction for payment.

Advantage of Debit Card -

• Easy to obtain : Once you open an account most institutions will issue you a debit card upon request.

• Convenience : Purchases can be made using a chip-enabled terminal or by swiping the card rather than filling out a paper cheque.

• Safety : You don't have to carry cash or a cheque book. 

• Readily accepted : When out of town (or out of country), debit cards are usally widely accepted.

Disadantages of Debit Card - 

• No grace period - : Unlike a credit card, a debit card uses funds directly from your checking account. A credit card allows you to borrow funds on credit, leaving disposable cash in your account.

• Check book balancing - : Balancing your account may be difficult unless you record every debit card transaction.

• Less protection - : Most financial institutions will try and protect their customer from debit card fraud. However, a customer could potentially be liable for up to $500 on fraudulent debit card transactions compared with only $0 on credit cards. Be sure to check with your financial institution to learn the details.

• Fees - : Using your debit card for ATM transaction may be costly if the ATM is not affiliated with your institution.