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How are Credit and Debit Cards Different?

Debit vs. credit — what’s the difference? It seems like a simple question, but it’s not an unusual one. They look the same, they’re both a way of making electronic payments. But how do they work and what really makes them different from each other?

Okay, we’ll break it down for you. U have definitely come to the right place.

Debit Cards 101

So, to understand how debit cards work, it’s helpful to know about their ancestor, the checkbook. Have you ever seen a checkbook? Like, in real life?

Time for a quick history lesson. Let’s hop in our time machine. You know, the time machine we have (just go with it, okay?).

Back in the day, a check was a piece of paper that was signed promising to pay the recipient a certain amount of money out of your checking account. That person would then cash the check, and the money would be transferred from one party to another.

Okay, you’re saying. Why does this matter? I came here for Debit Cards 101!

Take a deep breath, sip your herbal tea, and keep reading.

You Can’t See It (It’s Electric)

Now, as you may or may not know, people still write checks from time to time. The old-fashioned part that has pretty much gone the way of the dinosaur is keeping track of the checks you wrote by yourself, something called “balancing your checkbook.”

Accounting transactions used to be logged in a little balance sheet in the back of a checkbook, with people writing down each withdrawal and deposit and their impact on their overall account balance.

Debit cards took this process and automated all of it, doing the work of paper checks. Today, checking account holders no longer need to keep track of withdrawals and deposits themselves with the advent of online banking and mobile banking. They can check their balance any time they want, and even see their transaction history broken down by category.

The tedious process of writing out a check now takes place instantaneously with the swipe of a stripe or the insertion of a chip. You don’t need to wait around anymore for people to cash your checks to update your bank account balance, and you don’t need to wait in line at a bank to withdraw cash from your account or to deposit a check.

However, this all goes without saying that checks are still useful and important to have on hand as an accompaniment to your checking account. If you’re paying a service provider, sending a bill via snail mail, or making another type of payment where paper payment is preferred — or come in handy due to the nature of the transaction — checks offer classic convenience.

Oh, by the way, you can now deposit any checks you do get instantly with mobile deposit.

So far so good, right? Let’s take a look at credit cards.

Credit Cards (a.k.a. Borrowing Money)

If debit cards are automated check writing, credit cards are best thought of as borrowing money. When you apply for a credit card, your bank or credit union will look at your credit history and credit scores and give you a credit limit.

What’s This I Hear About Credit Card Interest?

Your credit limit is the amount up to which you can borrow, and it resets every time you pay off your balance. Like any loan, you pay back what you owe at a certain amount of interest, which is also determined by your credit history. This is because interest is basically a reflection of the amount of confidence your bank, credit union or card company has in your ability to pay them back. As a result, the better your credit score, the better your interest rate!

Interest accrues differently depending on the type of card and the category of transaction. However, as a general rule, it’s best to pay off your balance each month, so you’ll avoid paying interest. If that’s not possible, at least pay more than the minimum payment on your monthly statement.

Build Your Credit

If you don’t have much credit or are interested in building your credit score, a credit card can actually help you. When you use your credit card to make affordable, routine purchases and are diligent about paying off your balance as much as possible each month when your payments are due, you can boost your credit.

This means you’ll be eligible for low rates and affordable payments not only on future credit cards but for bigger loans such as mortgages and auto loans.

Rewards For U

Here’s something fun — we know this is what you’ve been waiting for!

Many credit card offers include the opportunity for rewards. This can take the form of points that you earn on transactions that you can redeem for travel, experiences, and lifestyle accessories, gift cards, or even cash back!

Of course, you want to be responsible about this and not get yourself into debt just so you can cash in your rewards. Treat yourself to something from your favorite retailer, or simply get cashback!

If you use your credit card for regular, everyday types of purchases for which you’d normally pay cash or use your debit card, you can rack up points without even trying while easily paying off your credit card balance every month.

Curious to learn even more about credit cards? Click here!

UMe Visa Credit Cards

If you’re looking for a rewards credit card with low interest rates that won’t suddenly change on you, the UMe Visa credit card has your back.

Every dollar you spend makes you eligible for rewards through points you earn, and you don’t have to pay any annual or additional fees, such as application and cash advance fees.

Check out the following sensational features of our UMe Visa credit card:

  • Low, fixed-rate
  • Earn rewards — like cash back — on every purchase!
  • No Balance Transfer Fees, No Cash Advance Fees & No Annual Fee
  • Instant card issue in-branch
  • Extra security and perks when enrolled in Visa Checkout
  • Verified by Visa fraud detection + Zero Liability
  • Online account management
  • Friendly, personal UMe Credit Union service (we think you’ll like this the most!)

Want to know more about how U can put your UMe Visa credit card to work in your favor?

learn more about our credit cards