How are debit cards like credit cards? How are they different? If your card has a MasterCard or Visa logo, you can use it to pay bills by phone, and to purchase gas at the pump. You also have the ability to make purchases in the grocery store, and any retail establishment that accepts credit cards.
According to Gwen Evans, a professional banker with ten years business experience, "debit cards are like credit cards in that they have a preset limit determined by the credit card issuer. Debit cards different in that they are limited by the amount of funds you may have in your (checking) account."
The MasterCard and Visa logos also make debit cards similar to credit cards. If your card has a MasterCard or Visa logo, you can use it to pay bills by phone, and to purchase gas at the pump. You also have the ability to make purchases in the grocery store, and any retail establishment that accepts credit cards. These logos offer many of the same conveniences that credit cards offer, like being perfect for smaller and everyday type purchases at the supermarket, drug store, or dry cleaners. Like credit cards, they also help you avoid the hassles of cash and checks. You will also make fewer trips to the money machine, and eliminate the need to provide I.D. at the checkout counter, in many cases. In addition, there is no risk of misplacing money. Debit cards are easy to use and each transaction is detailed on your monthly checking account statement, allowing you to monitor where and when you have spent your money.
Unlike a credit card, "With a debit card, you can gain more control over your finances. The ability to track your purchasing habits makes the debit card an ideal budgeting tool, helping you project future expenses or highlight irresponsible spending habits," according to the Indiana Department of Financial Institutions.
At first glance, the main difference between a credit card and a debit card is the requirement of a signature, versus the requirement of using a PIN number. More and more, however, a debit card user would also use a signature especially in restaurants and department stores. These debit cards, with MasterCard or Visa logos offer many people who do not have creditworthiness the conveniences of a credit card. However, they do not necessarily act as credit cards. Many rental companies rely on the consumer's credit card as an indicator of creditworthiness; therefore, they treat debit cards different from credit cards.
The Indiana Department of Financial Institutions also states, "New car rental rules represent the first case in which debit cards cannot be used in the same way as credit cards. The big car rental companies, including Hertz and Avis, have recently stopped letting people rent cars using just a Visa Check card or the similar Master Money card from MasterCard." Instead, "The rental car companies are requiring a customer with only a debit card to follow the same procedures as someone who pays cash to rent a car. That involves making an application several weeks in advance and leaving a substantial deposit."
The differences are not all bad, however. Debit cards allow the conveniences of credit cards without the finance charges as the funds come directly from the holder's checking account.
