Debits and credits

Debit cards and Credit cards

Debit cards and Credit cards are creative terms used by the banking industry to market and identify each card.^[7]From the cardholder's point of view, these terms are unrelated to the terms used in formal accounting. A debit card is used to make a purchase with one's own money. A credit card is used to make a purchase by borrowing money.^[8]

However, from the bank's point of view, when a debit card is used to withdraw cash from a chequing account, the withdrawal causes a decrease in the amount of money the bank owes to the cardholder. A decrease to the bank's liability account is a debit. Hence using a debit card causes a debit to a chequing (liability) account in the bank. Likewise, when a credit card is used by a cardholder to pay a merchant for something, this increases the amount the bank must credit to the merchant's chequing account. This obligation is the bank's liability and an increase to a liability account is a credit. Hence using a credit card causes a credit to a liability account in the bank.

Please read more fromhttp://en.wikipedia.org/wiki/Debits_and_credits