Similarities of Debit & Credit Cards

Credit cards and debit cards are similar in several ways. Both provide the convenience of not having to pay with cash, which is important when traveling or making expensive purchases. Additionally, both are issued by a financial institution. Whether you have a credit card or a debit card, you should keep a record of your expenses, pay attention to fees and keep your personal identification number (PIN) private.

Both credit cards and debit cards offer points and cash-back incentives for card purchases. Points may accrue for day-to-day purchases, such as food, gas and clothing, as well as travel expenses. Contact your financial institution for program details, rate structures and restrictions, which vary widely.

Both debit cards and credit cards contain a three-digit or four-digit card verification code (CVC). When purchases are made on the Internet or over the phone, a card holder usually must provide the CVC printed on the back. The CVC prevents a thief from stealing a credit card number off a billing statement and using it to make fraudulent purchases.

Debit cards and credit cards both carry fraud protection. Under the Fair Credit Billing Act, a credit card holder is liable up to $50 for fraudulent purchases; however, the card holder must notify the credit card issuer as soon as the card is lost or stolen. If notification is not given within 30 days, the card holder may be held responsible for the charges.

Some credit card issuers waive the $50 charge. Credit card holders have zero liability for merchandise that is damaged, of poor quality or never delivered. In such cases, the card holder must contact the seller or merchant first to seek a refund or replacement. If a refund or replacement is not issued, the card holder can dispute the purchase through his credit card company.

Debit cards also carry fraud protection. According to the federal Electronic Fund Transfer Act, your liability for debit cards is up to $50 if you notify the bank within two business days after learning your card is missing. However, the liability rises to $500 if you do not notify the bank within two business days after learning your card is missing. If you’ve never used your card, you have $0 liability if you report the loss or theft of the unused card immediately to the bank.

Debit cards do not charge high interest rates or fees for purchases; however, they may incur small fees. Credit card companies may charge a fee to transfer a balance from another credit card, a fee to obtain a cash advance, a fee to pay a bill late and a fee to exceed the credit limit. Some credit cards charge annual fees just to keep them open. Debit cards may charge a fee for purchases that exceed the balance available and a fee to withdraw money from a competitor's automated teller machine (ATM).