Credit & Credit Cards

When it comes to making purchases, not all plastic acts the same.

Debit cards and credit cards both offer a convenient way to pay without cash or checks, and both are accepted in nearly all the same places. But that's where the similarities end.

There are two primary types of credit cards — secured and unsecured. Secured credit cards are backed by a cash deposit, generally equal to the card’s limit. This acts as collateral and removes the risk of nonpayment for the card issuer. Secured credit cards are great options for those who haven’t built a solid credit history yet.

An EMV chip is a small microchip embedded in your credit card. Not all credit cards have EMV chips, but issuers will be strongly incentivized to issue cards with chips by October 2015, when a liability shift for fraudulent transactions will occur.

EMV chips have two major card verification methods (CVMs) — chip-and-signature and chip-and-PIN. Chip-and-signature cards, which are most popular in the U.S., use signatures to verify ownership for purchases. Chip-and-PIN cards are more popular in Europe, and use a four- to six-digit PIN for verification.

A credit card looks just like a debit card. However, instead of having the funds removed directly from your checking account when you make a purchase, you’ll essentially take on a short-term loan. This loan may or may not accrue interest, depending on when you pay it off.