The Difference Between Debit and Credit

Cash or card? In 2020, a better question is “Credit or debit?” 

When opening an account with a credit union or bank, mapping out a smart way to save and spend presents various options to do so accordingly. While many people favor debit over credit or vice versa, there’s nothing wrong with holding both cards in your wallet. In fact, it’s actually recommended for those who wish to keep a close eye on their transactions while also building credit. 

Whether you choose to sign up for a credit or debit card from Discovery FCU, it’s important to make note of the distinctions between the two and pinpoint how to best factor them into your financial equation. Check out these four key differences between debit and credit transactions.

Source of Funds

Whenever a financial institution member signs up for a debit card, he or she pre-authorizes their bank or credit union to extract funds directly from the desired account whenever a transaction is made. As the consumer has access to account balance(s) via online or mobile banking, this is considered a reliable transaction that can be reflected as soon as a purchase is made. A credit card transaction, however, is considered a charge to your line of credit, which will be paid off at a later date. 

Spending Limits

The spending limit on a debit card is pretty straightforward — customers can spend, transfer, and withdraw funds that have been deposited into their checking or savings accounts. With credit cards, a customer’s monthly spending limit is dependent on credit card type and credit score. Because transactions made on a credit card are technically “borrowed funds” from a bank or credit union, a yearly interest rate (APR%) is included in the purchase if bills have not been paid off on time. 

Credit History

We suggest the Visa Platinum card to members with good credit for higher spending limits and stronger purchasing power. A good credit score stems from paying off loans and bills on time — including credit card bills. Since debit cards are not a form of credit and are linked directly to a member’s checking account, debit card activity does not impact credit history. 

Rewards Availability

For members who can pay off their credit card bills on time, they can expect another benefit to using credit aside from zero interest fees — rewards! At Discovery FCU, our ScoreCard Rewards Program grants members points each time they make a purchase. They can be redeemed for various forms of travel and gifts in our ScoreCard Rewards Merchandise Catalog.

Ready to manage your money with the power of a Visa Debit or Credit card from Discovery FCU? Learn more about our personal checking and credit card services today. 

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