What exactly is the difference between a credit card and a debit card? Both are pieces of plastic used to pay for things and use to get money from ATMs. However there are many more differences than similarities.

There are many things that separate them, for instance, credit cards must be applied for, whereas debit cards come with just about every current account available today. They actually work in different ways too. Credit cards work as a loan. You are essentially borrowing money to pay for things that you will have to pay back at some point. Debit cards on the other hand will take the amount out of your current account. It is using the money you already possess, and once you have used your debit card, you don’t have to worry about paying anything back.

Carrying a debit card is much safer than carrying physical cash, but a credit card trumps them both in terms of safety. With a debit card, you’re subject to having someone take your money directly out of your account, and if you’re like me and have opted for paperless statements, I never check the goings out and comings in unless I’m looking for something particular.

However with a credit card, you get your statement to your door as you have to essentially pay back what you have spent. You will check it, and if you find something on your statement that shouldn’t be there, you can claim it back with adequate proof it wasn’t you.

When applying for a credit card, be sure to note whether or not it comes with any variety of fraud protection (most, these days, do provide this automatically). In certain areas, there are even separate companies that will provide you with insurance for identity theft and/or theft. It’s quite common these days for people to steal identities. Make sure yours is safe, there are little things you can do like shred your bank statements instead of throwing them straight into the bin.

A key plus point to having a credit card is, building up your credit rating, assuming you will pay off your debts every month and on time. Once you have built up your credit file, you’ll have much more flexibility with a credit card as opposed to a debit card. You will be able to get a higher credit limit, and lower APR credit cards, as you will be showing the lenders that you are responsible with your money.

With a debit card, you can only spend what you have, imagine a dress in the sale, it’s going to get snapped up by someone if you put it down, but you don’t have enough in your current account to cover it until payday… if you had a credit card you could easily pay for it on the card, and pay it off with your wage at the end of the month, never having to pay interest or late payment fees.

As long as you are responsible with your credit card, you should have no problems with using or obtaining one. They are good tools to use and will serve you well throughout your financial life.

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