ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Debit And Credit-What Each Means-How Each Might Affect You

Updated on July 31, 2017
cherylone profile image

Budgets and bookkeeping have always come so easy to me. I had planned to be a CPA, but life kind of got in the way.

Can you really tell me what they mean?


Debit-what does it mean

Debit means: "the recording or an entry of debt in an account". That definition comes from Merriam and Webster's site defines Debit as "to enter upon the debit side of an account : charge with a debit". Okay all you financial wiz's out there, we common folk need a real definition right? A definition that tells us how this simple word can wipe out our account in a single transaction. So what does Debit mean in simple terms? A debit means many things to many institutions.

In the banking industry it means something you remove. For example: if you charge an amount on your credit card, the amount will show up as a debit because the bank pays out the amount or debits (-) their resources to pay the amount. You are now in debt for that amount of money to the bank. This increases the amount you owe. However checking accounts work differently. You must have the money in the account to cover the charges you make. So a debit to your account means a withdrawal from your account. This reduces the amount you have to spend.

Debt is defined as "a state of being under obligation to pay or repay someone or something in return for something received" by Mirriam Webster. I think most of us are familiar with debt.


What does Credit mean?

Merriam-Webster defines Credit as: "reliance on the truth or reality of something". defines Credit as: "the ascription or acknowledgment of something as due or properly attributable to a person, institution, etc." So what does it mean in common terms? Credit is the amount of money one is given with the trusted promise to pay it back. So a 'credit' card is a plastic card that represents the amount of money the credit card company believes you will pay back. When you charge an amount on the card, you are promising to pay that amount back to the company. For example: If a 'credit' card company gives you five hundred dollars worth of 'credit', it means this is money you can use but the credit card company expects you to pay it back to them (with interest). When you make a payment to the company they will credit your account for that amount.

A bank will 'credit' your checking account for any deposits to your account. In most cases credit means a plus (+) to an account. That means if you see credit on your checking account it is something the bank is adding to your account. If you see credit on your credit card statement it is something that you have paid to the credit card company or something that they are giving back (such as an incorrect charge). This increases your amount paid and decreases your balance owed.

Did you ever understand the language of your bank?

See results

What is a transaction?

A transaction is something someone does with another person(s) or institution(s). Using a credit card to make a purchase or depositing money into your checking account are examples of transactions. Transactions happen all the time in the financial world. By understanding how they work, transactions will make more sense. It can also help you to keep your own finances in order.

Examples of transactions in the financial world:

  • Depositing money into your checking or savings account
  • Removing money from your checking or savings account (either with a check or debit card)
  • Buying or selling stock in a company
  • Paying on your credit card or personal loan
  • Paying or getting a mortgage
  • Buying gas (and/or using your credit or debit card)
  • Buying product from a store
  • There are endless types

All of these transactions affect you in some way. One might increase your debt to a company. One might pay-off (decrease) a debt to a company. Or one might increase/decrease your checking account. Be sure to track all transactions.

My account balance is what?


Did you know that a transaction you make today may not show up on your account for several days depending on the type of transaction?

See results

Why Debit and Credit are so important

If you do not understand these two little words, financial institutions will confuse you with their statements, definitions, and plus and minus transactions. They can add to your balance, in the case of a checking account, or be deducted from your balance, in the case of paying your monthly credit card payment. But each time the words can mean very separate things.

The smaller credits and debits can really confuse you. For example: a credit card company charges you a fee that is incorrect. You call the company and they correct the amount by 'crediting' your account for the amount in error. This will 'lower' your balance owed to the company. Banks might charge fees on your checking or savings account that will be 'credited' to your account. This credit will lower your balance available for use in your checking account.

Using an ATM can be very tricky because the debits and credits can erase your balance before you know it. For example: an ATM fee, a debit or credit amount that hasn't been applied yet (such as a check that has not yet been cashed) or an amount not recorded in your register. When checking your balance, be sure you have taken all charges and payments into account. Charging money on an account where there are charges pending might lead to an overdrawn account and fees (bank fees as well as company fees for the 'bounced' check). It might also lead to companies refusing to accept your check or debit card due to insufficient funds.

Look-now they know how to keep the credit and debit fears away.


Remember all of your transactions when check your credit balance.

Insufficient funds or an overdraft

Insufficient funds, it sounds like something that was put aside because it was bad (just kidding). Insufficient funds means not enough money. It is that simple. If you write a check to a company but you do not have enough money in the account to cover the check the check will be sent back to the company labeled with 'insufficient funds'. Or you might try to use your debit card someplace and the little machine you swiped it in comes up with those two words that tell the company you don't have the money to pay for your items. This means they will refuse your card.

Ah, my account is in good shape, no insufficient funds here. Now I can relax!


How accounts work

Your debit card and checking/savings account is the one you need to worry about most when making transactions. Why? Because every time you use your card or write a check your account is affected in some way. But, some items do not affect the account right away. And some affect the account at the exact time you make the transaction.

Things you should be aware of for your account

Delayed Charges
Holds on Funds
Your bank may charge you a fee for using another banks ATM
A check you write today may not be cashed right away by the company
You might deposit a check from a company or friend, but the bank doesn't let you have the funds until the other bank pays them the money
Your bank may charge a fee if your account goes below a specific amount
If the system goes down at a company, they may not charge your account right away
A gas station might put a hold up to $100 onto your account until the actual charge amount has been paid
Fees might be charged on your account unless you have something like direct deposit or a checking and savings account that are attached
When your actual bank is in another state
If your accounts are 'attached' to each other one account might be charged to pay for overages in the other account

Be aware of these items before you assume the balance an ATM gives you is correct. Using a form, such as a check register, to record all transactions can help you track your charges. And don't forget to ask about fees and penalties.

I get it now. Whew!


To summarize:

  • A debit is a plus (+) to your checking account but a minus (-) to your credit card balance.
  • A credit is a minus (-) to your checking account but a plus (+) to your credit card balance.
  • Fees, overdrafts, late charges etc. will all affect your balance no matter which account you are addressing.
  • Be careful to keep track of all transactions (especially with checking accounts, savings accounts, loans and credit card companies).
  • Save those receipts and record everything including confirmation numbers and dates of the transactions.
  • Don't go shopping using money you had actually used earlier to pay for something else. Be aware of your balance at all times.
  • When you are approximating an amount always assume the amount in your checking account is lower not higher.
  • Always assume the balance on your credit card is higher not lower.
  • Knowing about fees and penalties will keep you on track with your balance.

© 2017 Cheryl Simonds


This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)
ClickscoThis is a data management platform studying reader behavior (Privacy Policy)