What’s the difference between a credit card and a debit card?

When you pay for clothes in a store or dinner at a restaurant, you might use either a credit card or a debit card. In your mind, they may be the same. But there are differences to be aware of.

For example, with a credit card, the money is not immediately withdrawn from your bank account. As long as you pay back the issuer within the stated period, you won’t be charged interest on the money you owe. But you don’t want to make a late payment – interest can build up quickly on credit cards.

In contrast, debit cards are linked to your personal bank account, so you’re using your own money and the charges are automatically deducted from your account. Because you don’t carry a balance on the card, you’re more likely to stick with your budget and not overspend. However, you might be charged extra fees on top of interest for any overdrafts.

Another consideration: Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.

Which card is best for you? Generally, a mix of the two is a good compromise. You can use a credit card judiciously to bolster your credit, while still paying for everyday purchases with a debit card. Contact us for answers to your financial questions. We’re here to help.

About Brenda J. McGivern, CPA

Brenda McGivern started her own certified public accounting and management consulting firm in October 2001. The full service CPA firm provides tax and accounting solutions to meet the needs of today’s small business and individual. Brenda McGivern has become a trusted advisor and valuable resource her clients rely on for timely, accurate assistance when they need it.

Before starting the firm, she worked as an accountant for three years at a local firm and prior to that five years at a large international CPA firm in Boston. She has performed the following tax services: federal, state and local tax planning, international tax planning, estate and succession planning, mergers and acquisitions, capital retention and IRS representation. She has also coordinated assurance engagements, such as financial statement audits, reviews and compilations from the planning phase through the reporting phase. She has prepared and reviewed regulatory filings for numerous regulatory agencies including the Security and Exchange Commission.

Prior to these positions she was selected from over 2,000 candidates into an eight-person intensive financial management program at an international technology company. The program consisted of graduate level classroom study and two six-month rotational assignments in financial operations.

She graduated cum laude from the University of Massachusetts at Amherst and holds a Bachelors Degree in Business Administration with a concentration in accounting. McGivern also holds a license in Massachusetts as a Certified Public Accountant and is a member of the American Society of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. She resides in Stoughton, Massachusetts with her husband Brian, and their sons Sean, Ryan and Conor and their dog, Davis.

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