Clarke & Sampson Blog

Six Things You Should Know About Debit and Credit Cards

Scott Jefferson | Friday, February 7, 2014

Debit and credit cards are often used interchangeably. While these card types may seem similar, there are key differences between debit and credit cards in terms of how they work and consumer protection features. Here is a list of things you should know before using a debit or credit card:

  1. When deciding which card to use, keep in mind how they work.  A credit card is essentially a loan.  When you borrow funds using the card, you must pay the money back in addition to any interest that may be charged.  You may have to pay interest if you do not pay the entire amount by a certain date.  On the other hand, debit cards are issued by your bank and when you use them, the money spent is taken directly from your bank account. 

  2. Your liability for an unauthorized credit card transaction is generally limited to $50.  Federal law limits your losses to a maximum of $50 if your credit card is lost or stolen, although industry practices may further limit your losses.

  3. A credit card issuer cannot charge you a fee for going over your credit limit unless you agree to allow for over-the-limit transactions.  A card issuer cannot permit you to go over your credit limit and then charge a penalty fee for having done so unless you explicitly agree to it (“opt-in”).  You must tell your credit card company that you want it to allow transactions that will take you over your credit limit.  If you do not, then any transaction that puts you over your credit limit may be turned down.

  4. Your liability for an unauthorized debit card transaction may vary. The maximum legal liability is $50 if you notify the bank within two business days after learning of the loss or theft of your debit card. Otherwise, your losses could be greater.  You must also notify your bank within 60 days of your bank’s transmittal of your periodic statement on which an unauthorized transfer appears, in order to avoid liability for subsequent unauthorized transfers.

  5. A “hold” may be placed on funds in your bank account for debit card transactions.  At the time of purchase, merchants immediately place a temporary hold or “block” on funds for the transaction as protection against fraud, errors or other losses.  The hold will be removed when the final transaction is processed, nearly immediately or perhaps a day or two later, but until then, you won’t have access to that amount in your account.

  6. Credit card issuers must give cardholders 45 days notice of changes.  Under the Credit Card Accountability Responsibility and Disclosure Act of 2009 — the Credit CARD Act – the card issuer must generally provide a 45-day advance notice of any interest rate increase, fee increase, or any other significant changes in account terms.  In contrast, debit cards and prepaid cards vary in the amount of notice required for changes to the terms of use of the card.  For example, banks must provide 21 days notice before making certain changes to the terms of debit card usage.

Much of this information is available through the FDIC. You can learn more by visiting their website at


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