Credit Card versus Debit Card

A credit card is not the same as a debit card. While both are able to be used at most merchants, there are several specific differences between debit cards and credit cards. Credit card versus debit card differences includes everything from the cost of processing the transaction, interest and how quickly the funds are taken from the card.

Differences between Credit and Debit Cards

Transaction Costs

The cost of processing a credit card transaction is amazingly high. Depending upon the merchant processing account, a single credit card purchase of $100 can cost the merchant anywhere from $2.00 to $4.50! This cost can increase is the merchant has a large amount of fraud or other costs incurred. While these costs may become lower for merchants who process a large volume of transactions, they are tightly controlled by the credit card companies. Debit cards are charged at a set fee, unlike credit cards transactions which include a set fee and a percentage fee.

Interest Fees

Credit cards and debit cards also differ in interest. Since credit cards are, in essence, a borrowing of funds, this benefit will result in interest charges. To get the lowest interest rates, you must improve your credit scores. Debit cards on the other hand will only take what is available in your account (as long as you disable the ability to overdraft). No interest fees will be charged because you only use what you have.

Overdraft and Over limit Fees

In order to successfully complete a purchase a user must have funds in their checking account for their debit card. Credit cards do not require a user have any funds in their account. Instead, the user must have available credit on their credit line. Users who do not have enough money in their checking accounts tied to a debit card are assessed overdraft fees. These fees are typically in the $30 range and can occur for every purchase that you overdraft your card with. Credit cards charge an over limit fee. This is when a user makes a purchase over their credit limit. Some cards do not allow purchases over the limit while others will allow as many as possible so that the customer must pay the outrageous fees. Make you contact your bank to make the proper changes so you cannot overdraft your account and be charged ridiculous fees. In the past, an overdraft of a few dollars could result in a overdraft charge that exceeds the amount of the overdraft. New regulations have changed this but you should still contact your bank to make sure everything is in order.

Posting to Account Times

Credit card versus debit card transactions also varies in how quickly the funds are taken from the account. Credit card transactions reduce the available credit line but may take up to three days to post to the account. They are available on the merchant side in varying timelines that are set by the processor. Debit card transactions are taken immediately from a checking account if run as a debit transaction. They are available for transfer to a merchant’s bank account as soon as the next business day.

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