What is the Difference between a Charge Card and a Debit Card?

You may have the option of using a debit card as a charge card. This option is typically available on most debit cards from major banks today. While the card may be used "like" a charge card at many locations, however, it is never actually a form of debt like a charge card is. With a debit card, the amount you spend is always deducted straight from your checking account. With a charge card, the amount you spend is added to a balance you will pay off later.

Debit Transaction Basics

A debit card allows you to access your bank account directly through the magnetic strip on the back of the card. This strip holds electronic information that the processing machine uses to make a note of which bank account holder made the transaction. The processing machine reports this information to your bank, and your bank uses funds from your account to make the payment. This is the same as paying by cash or check, and a debit card is often called a "check card" as a result. You will not be charged an additional fee or interest for the transaction. The only exception is if your bank limits the retailers where you can use the card. In this case, there may be a small fee to use the card at a retailer restricted by your bank.

Charge Transaction Basics

A charge card transaction allow you to make a payment using loaned money. No funds will be drawn from your account when you make the charge. Instead, you will see the balance on your card grow. This balance can continue to grow until you have reached your limits. At that point, you will be required to pay down some of the balance if you wish to continue using the card. You will find the cheapest option is to pay down the balance as you go. Since charge card transactions come with interest, you will lessen you payment by avoiding compounding charges and paying down balances each month. Ultimately, though, you have the choice of when to actually pay for the transaction you made.

When a Debit Is Used Like a Charge

Some retailers do not accept debit cards. Instead, they will want you to use only a charge card. Thankfully, most debt cards have the emblem of a charge card company on them. This means the card carries the same basic electronic formula as a charge card. A processing machine will not notice the difference. To the machine, it will be just like you made any other credit card transaction. On your end, it will be like you made any other debit card transaction. Instead of paying interest, adding to the balance on your charge account and paying the funds later, the debit will still come directly from your checking account. The most common places where the charge method is preferred are online retailers. You can enter the number on your debit card and it will be the appropriate length in the space provided for a charge card number.

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