Small Business Brief

Financial Services

Get Carded: A Brief Look at the Difference Between Credit Cards and Debit Cards

Credit card vs debit card: what’s the real difference? Which one should you choose? Or should you consider both? We review all the facts for you right here.

Credit or Debit?

You’ve seen the question at the pin pad in the grocery store, the gas station and even in restaurants. But, do you know which one do you choose for your small business? Let’s compare credit card vs debit card to find out!

Like most small business owners, you’ve probably got both in your wallet. There are some significant differences between the two that you should understand.

Credit Card vs Debit Card

There’s a best time and place to use each one. But before you can choose, you need to know the differences between a credit card and a debit card.

The Credit Card

A credit card links to an account that allows you to borrow money from a bank. It has a credit limit and you will be charged a specific rate of interest on the balance you carry.

There may be other terms and conditions, such as annual fees and over-limit fees. Your bank will give you the details.

There are significant benefits to owning a credit card.

  • Build Credit – If you own one and use it responsibly, your credit card will build up your credit score. Borrowing with your credit card and paying back on time can make your credit score look strong. This is important if you are looking to get extra funding for business growth.
  • Buyer’s Protection – Credit cards have built-in protection against fraud and theft. You can dispute charges that you didn’t make and have them removed from your account.
  • Rewards Programs – One of the best benefits of credit cards are the rewards programs available. When you borrow, you can earn points towards travel, merchandise, and even statement credits.

The Debit Card

A debit card links to your business checking and savings account with your bank. You use it to access your money at ATMs, at online shops and physical stores. You can spend only the money you actually have in your account.

You won’t be charged interest, and some accounts actually earn a little interest if you carry a large balance.

Here are some of the benefits of using a debit card.

  • No Fees – There are usually no fees associated with using your debit card. If you are careful to use only ATMs associated with your bank, you’ll be able to take out money for free. Keep your minimum balance, and the account is probably fee free, too.
  • Controls Spending and Budget – If you can only spend what you have, you’ll keep your spending under control. Using your debit card is a responsible way to remain free of excessive debt.

Some banks and credit unions use a company like United Card Solutions to provide even more security and benefits to cardholders of both credit and debit cards. Your bank will have more details about these services.

Which One to Choose?

Believe it or not, there is a right time to use credit and a right time for debit. When considering credit card vs debit card, keep these in mind.

Choose Credit

Using your credit card is a good idea if you are concerned about the privacy and security of the transaction. It’s also a great idea to use it anywhere you earn rewards.

Here are a few important times to use your credit card instead of your debit card.

  • Online Shopping
  • Traveling
  • Opportunities to Earn Extra Points
  • Online Subscriptions
  • Independent Vendors

Choose Debit

Your debit card is the best option when you are looking to stay on your budget and spend the money you’ve actually earned.

Here are a few times you’d choose your debit card over your credit card.

  • Owner Withdrawl of Profits
  • Pay at the Pump
  • Grocery Store
  • Local Shopping Centers and Stores

It’s Up To You

The credit card vs debit card debate still comes down to your choice. Consider all the benefits of each card type. In the end, it’s up to you to decide which one is best for each transaction.

Looking for more news and information that could benefit your small business? Check us out here. We also have a great selection of templates and forms for your small business needs!