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Debit vs. Credit – What’s The Difference?

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Debit vs. Credit

If you are a sole trader or a business person running various enterprises, these two terms are not new. However, if you are new in business, there are higher chances of confusing the two terms. Luckily, you have landed on one of the financial websites that define such terms conclusively. In other words, if you have been struggling to differentiate terms, continue scrolling down the article and understand the difference between credit and debit.

Bookkeeping

Once you start venturing into serious business, you will appreciate the importance of bookkeeping in running a business. The two terms, credit and debit, play a critical part in striking a balance in various financial statements. In other words, credit and debt are some of the book entries that balance each other. This aspect is linked to the fact a debit entry adds a positive number to a balance sheet while a credit entry always adds a negative number to the sheet. For this reason, bookkeepers prefer placing a debit entry on the left-hand side while a credit entry is placed on the right-hand side. Therefore, a debit entry increases assets or expenses accounts and decreases the revenue, equity, and liability accounts. On the other hand, a credit entry increases the revenue, liability, and equity account and reduces expenses or assets accounts.

Debit and Credit Card

Debit and credit cards are some of the payment cards widely used across the globe. The two have a series of unique numbers printed or embossed together with the cardholder’s name. In addition, they have a magnetic stripe at the back that has a unique code used to relay the financial information of their holders and their related bank accounts. Although the two cards are used similarly, they tend to have inherent aspects that differentiate them.

Major Differences

A debit card usually utilizes funds from a bank account. On the other hand, a credit card is linked to a credit line that can be paid back later. The card gives owners an added advantage: they can purchase more items and repay later. However, you need to understand that a customer’s credit line depends on their creditworthiness. However, if you are used to taking loans, you will appreciate the value of having good creditworthiness. If you fail to pay your loan in good time, you may affect your credit score, and your worthiness of accessing credit lines will be affected. However, to resolve this issue, numerous companies out there offer credit repair services to customers with poor credit scores. Therefore, if you have a poor credit score, make a point of accessing such a service and regain your confidence in accessing loans and new credit cards. Learn the difference between credit repair and credit sweep in this post at Daily Prosper.

Bottom Line

Having a credit card is critical as it will help you out, especially if you need to purchase an item and you do not have the funds required. However, it would be best to be careful as having a poor credit score may affect your worthiness, and it might be harder to access such cards.

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