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Debit Credit Cards and Other Types of Credit Cards Explained

Debit credit cards are just one type of financial product in a crowded marketplace. With some many types of plastic available it can become extremely confusing for the customer as to which card does what, so in this article we provide an introduction to the different options available.

Debit Cards

This type is probably the easiest to understand, as it is simply a card that is linked to a customer's regular bank account. The card works in much the same way as a check book, with the customer paying for items using the card, and the money being deducted from their checking account.

The main difference compared with a check book is that the sum goes out of their account immediately, rather than waiting a few days for a check to clear.

Credit Cards

There are two different types of credit cards, with the most common and traditional variant known as an unsecured card. The owner is assigned a credit limit, and can spend on the plastic up to a maximum of this amount. They are then presented with a monthly bill, and are required to pay a minimum amount of this bill before a due date.

The second type is a secured card. Owners of this type of financial product are required to make an upfront deposit of their own cash, which then acts as security against the card. If they do not pay their bills on time they have money deducted from their bond, and their credit limit is reduced accordingly.

Prepaid Cards

These require the owner to top them up before use, in the same way that you would use a pay as you go cell phone. Once the balance has been exhausted it needs topping up again before it can be re-used. Contrary to popular belief, prepaid cards are not credit products, as no line of credit is being provided, and it is not possible to get into debt by using them.

Debit Credit Cards

This type of card is used in much the same way as a debit card (see above), but comes with an additional credit facility. The cardholder can choose whether they wish to pay using the debit option - where the money is removed from their account instantly, or the credit option - where the purchase is deducted from a credit limit, and needs to be paid off at a later date.

Debit credit cards are essentially a debit card and a credit card that come in a single unit. They are becoming increasingly popular due to the extra convenience that they offer customers.

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Article Added on Thursday, December 22, 2011
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