Difference between Debit and Credit Card


Difference between Debit and Credit Card

The Key difference between debit and credit cards is that the former are always associated with the balance that the customer has in the current account, while the credit cards allow operating with money borrowed from the financial institution.

Debit Card Vs Credit Card

When money is withdrawn from a cashier with a debit card or payment is made with it, the amount of the transaction is automatically deducted from the balance of the associated account; In fact, if there is not enough balance to carry out the operation, it will be denied.

However, when the credit card is used, the bank is the one that is lending the money, which will have to be returned the following month or in several installments, paying an interest for the same. In this case, the financial institution advances the money regardless of the balance that is held in the account (for this reason, before granting a credit card, the bank studies the viability of the client, making sure that it is solvent). Even so, the credit card has a limit.

Credit can be “repaid” in three ways:

  1. At the end of the month (an established day of the month following the purchase).
  2. By a percentage (which we will disburse every month).
  3. Fixed fee (this modality is known as revolving, and consists of paying a fixed amount).

Credit cards are defined as a financial instrument: they allow you to pay in installments and make purchases without having to pay the total payment. Conversely, debit cards are a means of payment in and of itself: the amount is directly charged to the account holder and discounted directly from the balance.

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Differences in commissions and discounts on different cards

Another difference between both types of card resides in the commissions that are paid by each of them. Depending on each bank, they usually charge an annual fee for each type of card, normally the debit card fee is cheaper than in the case of credit cards; However, this information of the commissions is interesting when choosing the bank where it is wanted to contract the checking account and the cards

There are also differences when you want to withdraw money at ATMs. If the debit card is used at an ATM of the financial institution itself, you will not normally have to pay any kind of commission. If, however, money is withdrawn with the credit card, the financial institution will charge interest when the balance of the card is paid; These depend on each type of card and each bank, but are usually quite high (around 20% per year). Therefore, and according to experts, “you should never use the credit card to withdraw money from a cashier unless it is a force of greater cause and there is no balance in the account.”

When making purchases, there are credit cards that offer discounts in some establishments, which can always be interesting. Debit cards, on the other hand, do not usually have any discount associated with them.

Finally, if the debit card is used irresponsibly, the holder can run out of money in the account, but can not spend more than he has. However, misuse of credit cards can lead to severe indebtedness.

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