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February 3,2009

  • Credit or Debit; What's the difference?, Pt.1
      Some friendly education.

    Credit cards and debit cards are both made of plastic, look the same and you swipe both of them. Many people can't even distinguish the difference between the two. But, this is where the similarities end. (The one exception is when a debit card has the line of credit' feature added to it.). The most significant danger here is that even fewer people realize how stark the real differences really are. The limited education most people get differentiating between debit and credit cards is almost always from the School of Hard Knox. Each type offers benefits and threats but as to their nature, these considerations tend to be opposite from each other. So it should be helpful for card holders to learn how the debit and credit card systems work from a more forgiving education system in order to put them to best use. Several functional categories are presented here they are:

    • Effective Power;
    • Convenience;
    • Risks;
    • Acceptability;
    • Disputes.

     Effective Power:

    • Large purchases: Definitely credit cards. It's just not a good idea to suddenly put large sums of cash into a stranger's hand. There is so little protection.
    • Collateral: This one goes to credit cards also. Say you want reserve a hotel room. You may or may not stay there. With a credit card, you simply tie up some of your unused credit for a week. What if you need to rent a car or U-Haul? You can either dish out $500 in non-refundable cash for added insurance or rest on the clout of your credit card. You can also use a debit card but the difference is, $5000 cash could be pulled from your bank, hopefully for only a week. Meanwhile, that cash is gone from your bank account.

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