How are Debit Cards Different from Credit Cards?

People often ask what exactly are debit cards and how have they managed to grow in popularity so much since the credit crisis began. Also commonly known as ATM cards – since they can be used in these automatic teller machines to gain access to bank checking or savings accounts – debit cards are a versatile and handy type of plastic and they share many characteristics with ordinary credit cards.

But while a credit card can be used to carry a balance as a revolving line of credit, a debit card can only be used to take money directly from a deposit account – like a savings or checking account – that has money in it already. In other words it can debit an existing source of cash, but cannot be used in place of cash as a means to borrow money you do not already have in the bank.

That feature limits the ways that debit cards can be used, of course, but it also puts limits on how much they can be misused or abused. You can only buy what you can already afford to pay for, in other words, whereas with a credit card you may get into trouble by spending money one month that you are unable to repay when the bill arrives the following month. For that reason debit cards have actually grown in popularity since the start of the recession and credit crisis, because people can use them to make purchases instead of carrying cash, but they cannot use them to take out loans or buy things with money they do not actually have in the bank.

When they were first created, most people used their bank debit cards only at ATM machines, like when the bank lobby was closed or they were traveling out of town. But because a debit card can also be used in place of a Visa card or other credit card, they have now become much more popular as a less risky alternative to the traditional credit card. They offer the convenience of plastic carried in the wallet, in other words, without the option to use them irresponsibly and wind up going way over your realistic budget.

And for those whose credit has been damaged by the credit crisis – and who now find it impossible to get a credit card application approved – the debit card is simpler to acquire. You do not have to have a great credit score to carry an ATM card and you don’t have to fill out complicated applications forms. All you really need to do is open a bank account, which is something that even people with bad credit are often able to do with no problem.
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