U2 L9 Debit vs Credit Cards Flashcard

Front

What is a debit card?

Back

A payment card that deducts money directly from a consumer's checking account to pay for a purchase.

Front

What is the main function of a credit card?

Back

To allow the cardholder to make purchases and pay for them at a later date.

Front

How are debit and credit cards used differently?

Back

Debit cards use the cardholder's own money, while credit cards allow people to borrow money up to a certain limit.

Front

What are the typical fees associated with a debit card?

Back

Monthly maintenance fees, ATM withdrawal fees, overdraft fees, and foreign transaction fees

Front

What are the typical fees associated with a credit card?

Back

Annual fees, late payment fees, balance transfer fees, cash advance fees, foreign transaction fees, and over-limit fees

Front

What are the advantages of using a debit card?

Back

There are no interest charges, helps control spending, no risk of debt accumulation.

Front

What are the disadvantages of using a debit card?

Back

Does not help you build credit

Front

What are the advantages of using a credit card?

Back

Convenience, rewards, build credit history, purchase protection, and fraud protection.

Front

What are the disadvantages of using a credit card?

Back

Possible overspending, high interest rates, potential debt accumulation

Front

When would it be better to use a debit card instead of a credit card, and vice versa?

Back

It depends on the purpose of the transaction and your ability to pay off the amount.