Advertisement
credit & debt

Charge Cards vs. Debit Cards

Not all plastic cards are created equal.

graph of most at risk for tariffs and paired graph of victims of market swoon

When discussing the kind of credit that comes with a plastic card, the first distinction to make is between charge cards and credit cards. American Express Green Card and Gold Card and Diners Club Charge Card are charge cards that require you to pay your bill in full each billing cycle. Most credit cards (including some offered by companies that also issue charge cards) don't necessarily encourage you to pay your bill in full because they profit by charging interest -- lots of interest -- on the unpaid balance.

 

SEE ALSO:

11 Credit Card Mistakes to Avoid

Advertisement - Article continues below

p>

Charge cards. Travel and entertainment cards, such as American Express and Diners Club, are charge cards, not credit cards. You are expected to pay their bills in full within a specified time period. If you don't, you'll be penalized.

You may be able to get a bigger credit line with a charge card, but they're not as widely accepted as Visa or MasterCard.

Debit cards. A debit card appears to work the same way as a credit card: The merchant runs it through a little machine and off you go without any cash actually changing hands. But that's where the similarity ends. When you use a debit card, the amount of your purchase is deducted from your checking account or some other account you have designated. It's useful to think of a debit card as a paperless check that clears immediately, with no grace period, or "float."

If you're not paying close attention, you may find yourself carrying a debit card from your bank that you think is a credit card. That mistake usually lasts no longer than the arrival of your first bank statement showing your depleted balance.

Two key facts to remember about debit cards:

-- Although they look like credit cards, they aren't. -- Safeguards against loss or theft and unauthorized use of your card aren't as strict as they are with credit cards. By law, you're liable for the same $50 as with a credit card, but only if you report an unauthorized transaction within two business days of discovering it. Miss that deadline and you're legally responsible for up to $500. But MasterCard and Visa will waive it entirely in many cases.

Advertisement
Advertisement

Most Popular

7 Surprisingly Valuable Assets for a Happy Retirement
happy retirement

7 Surprisingly Valuable Assets for a Happy Retirement

If you want a long and fulfilling retirement, you need more than money. Here are the most valuable retirement assets to have (besides money), and how …
August 3, 2020
Turning 60 in 2020? Expect Lower Social Security Benefits
Coronavirus and Your Money

Turning 60 in 2020? Expect Lower Social Security Benefits

When you file for Social Security, the amount you receive may be lower.
July 30, 2020
How a Second Stimulus Check Could Differ from Your First One
Tax Breaks

How a Second Stimulus Check Could Differ from Your First One

The HEROES Act, which was passed by the House in May, would authorize a second round of stimulus checks. While the new payments would be similar to th…
July 22, 2020

Recommended

6 Money-Smart Ways to Spend Your Stimulus Check
Tax Breaks

6 Money-Smart Ways to Spend Your Stimulus Check

If you don't have to use your stimulus check for basic necessities, consider putting the money to work for you. You'll thank yourself later.
July 30, 2020
8 Money-Smart Ways to Spend Your Tax Refund
Tax Breaks

8 Money-Smart Ways to Spend Your Tax Refund

Since this year's tax deadline was pushed back to July 15, many people just recently filed their tax return. That means there are a lot of tax refunds…
July 17, 2020
Know Why Your Credit Score Changes: 9 Money Moves to Consider
credit & debt

Know Why Your Credit Score Changes: 9 Money Moves to Consider

Your credit score is a key indicator of your financial well-being and of the risk you pose to lenders. How good is yours?
July 10, 2020
52 Super Deals and Discounts for 2020
spending

52 Super Deals and Discounts for 2020

With a special nod to those of you spending more time at home, we found dozens of deals and discounts, plus ways to save (or make) money.
June 6, 2020