Ah,
“good old days”. If you are a baby boomer, like me, then you probably remember how important it was to rush to bank on payday. You had to get there before teller lanes closed so that you could have your “cash allowance” for week. Otherwise, if you needed cash you had to write a check, then go to bank, and “cash” check for real cash. Fortunately days of mad rush to get cash from bank are long gone. We now enjoy convenience of using a nearby automatic teller machine (ATM) or you can even get “cash back” at your local grocery, hardware or convenience store.
The card you use at ATM is known as a debit card. When debit cards first appeared it was easy to tell them apart from credit cards. Debit cards didn’t have a credit card company logo on them; instead, they usually just had your bank name, your account number and your name.
Today debit cards look exactly like credit cards even carrying same logos. Both types of cards can be swiped at checkout counter , used to make purchases on internet, or to pay for fill-up at gas pump.
When you use your debit card to make a purchase, it’s just like using cash. The account that is attached to your debit card, in most cases your checking account, is automatically debited when you use your debit card. The cost of your purchase is deducted from funds you have in that account.
On other hand, when you use your credit card to make a purchase you are using someone’s else’s money, specifically issuer of credit card, usually a banking institution.
In effect, you agree to pay them back money you borrowed to make your purchase. In addition you will also pay interest on money “loaned” to you at rate which you agreed to when you applied for their credit card. This is known as annual percentage rate (APR).
While two cards might act and look alike, levels of consumer protection that each type of card provides can be different.
Under federal law, if someone steals your credit card you're only responsible to pay first $50 of unauthorized charges. However, if you notify credit card issuer before a thief is able to make any charges you may be free from all liability. If credit card is not physically present when an unauthorized or fraudulent purchase is made, such as over internet, you’re also free from liability for those charges.
