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Different Types Of Debit Card And Credit Card

By Kid Grimm on June 18, 2011

Life today to a large extent revolves around plastic money. Credit or debit cards are used to buy tickets, pay for holidays or purchases, and even pay college fees. Children are given a credit or debit card the minute they turn 18 and, more often than not they tend to keep the same card for many long years.

Each of these cards will require funds to be deposited in advance before using them, so what's the difference? The truth is there are some distinct differences that may work better for people from different walks of life. I have listed these differences below.

Prepaid Debit Cards:- Prepaid debit cards are a descendant of the secured credit cards that you are probably familiar with. Prepaid debit cards are just that, debit cards that have the Mastercard or Visa logo on them and are accepted worldwide. Much like your bank debit cards they deplete funds in your account as you use them, they do not require monthly payments and do not charge interest.

The major difference is how you qualify for one and how much it cost to use the card. Prepaid debit cards are not concerned with having card holders qualify for their cards. Most issuers do not verify employment, credit, addresses or even legal residency. This makes these types of cards very popular with immigrant workers in the United States illegally.

Debit cards are also more fee intensive than traditional secured credit cards. They have fees that are usually measured by transaction. Other fees include, loading fees, transfer fees, check deposit fees, annual fees and more. This is the price people have pay for convenience and anonymity. These cards will not report cardholder transactions to the credit bureaus, which is not ideal for those who are trying to establish credit.

In our society it is virtually impossible to live without some type of visa or Mastercard, debit cards fill this void. They offer a "de facto" banking system for those unable to qualify normally. They offer direct deposits for paychecks and many other features to a segment of society that traditional banks have left out in the cold. All in all, prepaid debit cards are pretty cool for some people.

Secured Credit Cards:- are credit cards that are specifically designed for people with bad credit. Most people that apply for these types of credit cards do so to build or rebuild their credit. The other advantages are they appear, look and act exactly like a regular credit card. Most prepaid cards are clearly marked as debit cards with outrageous designs and colors.

The price you pay for rebuilding your credit is interest. The worst thing is that you are paying interest on your own money! Unlike prepaid debit cards, secured cards usually carry pretty steep interest rate, usually around 15%. Secured credit cards are not usually "re-loadable". Meaning, once you make your initial deposit this becomes your "credit limit". Your payments will bring down the balance giving you more purchasing power.

Secured credit cards report to the credit bureaus exactly the same way a regular credit card does. Creditors that review your credit for purchases have no idea if your credit card is secured or not. Another thing to watch is that most people will fund their cards with money that they intend to use immediately. Meaning they send in $500 and expect to be able to go out and spend that $500 immediately on receipt of their card. This is not good borrowing practices and will actually bring down your credit score.

Student Card:- A student credit card is issued by Visa, Master Card, Discover, or American Express Card. These credit card giants and their associates generally fix a credit limit of around USD 500-1000 to begin with. While some grant a card without a guarantor others request the parent or guardian to cosign and agree to take on complete responsibility for the card.

A debit card is issued by Visa or Master Card and is prepaid. Such a card does not need a consignee and a debit card requires no credit history to be eligible. Further more, used up money can be replenished online, through an ATM, and via a phone. In the case of debit cards the bank or financial institution is not offering a credit line it is just issuing a card for the amount held in security by them.

Essentially, a debit card is a card that accesses your own money. It adjusts expenditure against money in your savings account or against the amount pre paid. In this case instead of paying cash you are swiping a card and paying out of money already held by you. On the other hand in the case of a credit card it is a buy now pay later business. It is a kind of borrowing where you promise to pay the credit card company in full or part when the money arrives. Interest on the amount spent is payable only if you do not settle the bill in full.

Debit or credit cards are universally accepted and one can even purchase plane or train tickets or pay for unforeseen medical or hospitalization expenses using them. They are extremely useful as a stand by and can be used to establish a good credit report and score. A student credit or debit card trains kids in the effective handling of finance and puts them on the path to becoming responsible adults.

Find the differences between debit card vs Credit card. Visit http://www.TheMoneyTimes.com to get latest Finance News.

Original article published on SooperArticles.com

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