What Is the Difference Between a Bank Card, Credit Card & Debit Card?

What Is the Difference Between a Bank Card, Credit Card & Debit Card?
••• credit card and hand image by Warren Millar from Fotolia.com

Gaining access to your money is now more convenient than ever with the increasing number of digital personal finance tools available today for different methods of payment. It's no longer necessary to write a check or make a withdrawal when you need money.

All you have to do is pull out a card, swipe it, and your transaction is complete. Swiping a card is convenient, but it can get you into trouble. You should understand what type of card you have before using it. Understanding how different payment card types work will help you manage your personal finances better.

Debit Card Basics

A debit card works the same as cash or a personal check, but provides more features. The money you spend comes directly from your bank account. A debit card provides quick access to your funds. You do not pay interest, and you can use it to shop online and offline.

The transaction will be declined if there is not enough money in your account to cover the cost. Some banks even place a limit on the amount of money you can withdraw per day. You can use your debit card at an ATM to check your balance, transfer funds or freeze your account, if necessary.

Credit Card Basics

A credit card provides you with a line of credit you can use to make purchases. There is a specific amount of credit on the card you can use. If you go over the limit, your transaction will decline or your will be charged a fee. Credit card purchases can end up costing more because the account accumulates interest if not paid off in full when the bill arrives. In addition to interest, there are late payment fees and over-the-limit fees.

Falling behind on credit card payments costs you late fees and can damage your credit worthiness. Late payments reported by credit card companies to the three credit-reporting bureaus can are serious – your payment history accounts for 35 percent ​of your FICO score, the main score used by many lenders to evaluate you.

You can use credit cards to get cash advances (usually at a higher interest rate than you have for purchases) or make a balance transfer to try and reduce the amount of interest you're paying on a large balance.

Bank Card Basics

A bank card is a card that can only be used at an ATM. The card is often referred to as a ATM card. You can perform the same transactions at an ATM that you can with a debit card. This type of card existed before debit cards.

Your debit card might have a Visa or Mastercard logo, which means you can use it anywhere Visa and Mastercard are accepted. A bank card helps control spending because you cannot use it in many places – therefore, you are less likely to make impulse purchases.

Applying for Cards

You do not apply for a debit or bank card. Your bank issues them to you when you open an account with them. Since they are attached to your checking account, your credit history is not important. The money in your account secures all of your purchases.

You have to apply for a credit card, which includes the credit card issuer doing a "hard pull" of one or more of your credit reports. This can lower your score lightly, so don't shop for credit cards by making multiple applications.

Only apply for a credit card after you have done your homework. The creditor considers your credit history and current financial situation (such as your salary and debt level).