Benefits of Debit vs. Credit Purchases
Debit cards and credit cards serve the same purpose--to provide a convenient, noncash way to make purchases--but they operate in distinct ways that have major implications on personal finances.
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Function
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Debit card purchases draw funds from an existing account to make purchases, while credit cards use debt to fund purchases.
Payments
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Since debit cards use existing funds, no further payments have to be made on debit card purchases. This means debit card use normally will not lead to debt like credit card use will.
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Limits
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Credit cards purchases are typically limited to a given credit limit; debit card purchases are limited only by the amount of money in the account associated with the card.
Costs
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Since debit cards do not incur debt, the costs are usually significantly less than those of credit cards; credit cards often involve high interest rates on existing balances. Both types of cards may be subject to finance charges and fees, especially if credit limits or account balances are exceeded.
Considerations
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Debit cards offer the convenience of credit cards without the risk of falling into debt. They force consumers to spend only the money they have rather than money they might not have.
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