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Dollars & Sense: Debit vs. Credit Cards – What You Need to Know

Dollars & Sense: Debit vs. Credit Cards – What You Need to Know

Dollars & Sense
SouthEast Bank| July 2, 2021
Dollars & Sense: Debit vs. Credit Cards – What You Need to Know

If you’re looking for a convenient, secure way to pay, plastic is often the way to go. But understanding the difference between debit cards and credit cards can give you a sense of which is a better payment method for you.

While the two may look almost exactly alike in your hand or wallet, there are some clear differences between the two and how they function.

Debit vs. Credit Cards at a Glance

Before we dive into how debit cards and credit cards work, here’s a quick summary of some of the differences between them:

 Debit CardsCredit Cards
Linked to a checking accountYesNo
Provides a line of creditNoYes
Charges feesTypically, yesYes
Charges interestNoYes
Potential liability for fraudulent purchasesUp to the full amountUp to $50, but typically zero
Offers rewards and perksTypically, noTypically, yes 

What Is a Debit Card?

A debit card is a payment method that’s linked to your checking account, allowing you to access the funds in your account to make payments online and in person. Debit cards offer the same convenience as credit cards, but they don’t typically allow you to spend more than you have in your checking account except for through overdrafts. 

One type of debit card, a prepaid debit card, is not linked to any bank account, but instead allows you to spend money that you’ve loaded onto your account.

Depending on the account that your debit card is linked to or the prepaid card that you have, there may be fees for monthly maintenance, ATM withdrawals, foreign transactions and more. 


Pros of Debit Cards

There are many reasons to consider using a debit card instead of a credit card, or at least as your primary payment method:

Cons of Debit Cards

Although a debit card may be a no-brainer for some people, there are some potential issues to keep in mind when using one:


What Is a Credit Card?

A credit card is a payment card that’s linked to a line of credit that you have with a bank, credit union or other card-issuing institution. There are many different types of credit cards that offer various rewards, benefits and other features. But in general, they all allow you to borrow money from the card issuer and pay it back, sometimes with interest.

Some credit cards, called secured credit cards, allow you to get access to credit by providing an upfront security deposit to secure that credit line. These cards are typically reserved for people with poor credit and return your deposit when you close the account or even sooner.


Pros of Credit Cards

Depending on how you manage your money, there are plenty of reasons to consider using a credit card for your everyday spending:


Cons of Credit Cards

Although there are several reasons to consider using a credit card instead of a debit card, here are some potential pitfalls to watch out for:


The Bottom Line

As with any financial product, there are both pros and cons to using a debit card versus a credit card and vice versa. Take your time to consider all the benefits and drawbacks and consider your spending habits, budget, credit score and general preferences to determine which one is best for your everyday spending needs.

To learn more about SouthEast Bank’s credit and debit card offerings, click here.

*APY = Annual Percentage Yield

1To earn the bonus rate, the account holder must have a SouthEast Bank checking account with the Round Up feature, the Bonus Rate Savings account must be enrolled in eStatements and post and settle at least 15 round up debit card transactions. You must be a primary owner on each checking and savings account. If all qualifications are met during the statement cycle, 2.01% APY will be applied on the balances up to $10,000 and .20% APY on balances over $10,000 will be credited. If bonus qualifications are not met during the statement cycle, the account will earn 0.05% APY. Unlimited withdrawals at teller window or ATM and 6 pre-authorized withdrawals per month at no charge, including checks, ACH debits and online banking transfers; $3 fee for each withdrawal thereafter. Fees may reduce earnings. Limit one Bonus Rate Savings account per primary owner tax ID.  Rates are accurate as of 6.1.21. Rates are variable and subject to change after account opening.

Note: Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.

Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.