Cards have become the popular payment method among people of all ages. They are comfortable, easy to use and do not take up too much space in our wallets.
In addition, at the moment they are in the best form of payment to be more hygienic than cash and there are even establishments where you can only pay with a card.
But while it’s common, not everyone knows what it means to have a credit card and a debit card. Although the two expressions are treated as synonyms, they are not and we will find out below by examining them. the differences between a debit card and a credit card.
Differences between a debit card and a credit card: how do you tell them apart?
Credit and debit cards are tools that have become commonplace in the daily lives of millions of people. It is thanks to these pieces of plastic that we can pay large sums of money at a time without having to carry everything on coins and banknotes. This is one of the main reasons why more and more people are using cards, being a very convenient method and not having to count the money to pay before making the transaction.
In addition, they are considered a very secure payment method because in many transactions we are asked to type in a secret number, especially if it is high payments or transfers. Virtually all banks have mobile apps to allow us to virtually manage our account associated with the card, and in the event of theft, we will be able to deactivate it before the offender gets our savings.
Many believe that it is only a matter of years before cash is completely replaced by cards.. Indeed, the COVID-19 pandemic and the hygiene measures that accompany it have led the vast majority of establishments to advise their customers to pay by credit or debit card, and some no longer even accept payments. made of metal.
But even if they are widely used, not everyone knows what kind of card they have and what their advantages are. Because the words “credit” and “debit” are very similar and used in similar contexts, many people think that having a credit card and having a debit card are the same thing, or that there is just of the banking companies they prefer to call cards one way or another, but the truth is that there are differences between debit card and credit card, some of which are very important to take into account. next time we use one of those plastic pieces.
1. Where does the money come from?
The main difference between debit cards and credit cards is where the money we use to pay with them comes from.
On the debit card, payment is taken from the money in the cardholder’s account. Debit cards are associated with the balance the customer has in their checking account, and upon payment, the payment is billed directly to the account holder. The debit card owner will be able to pay up to the funds limit in their account.
Instead, the credit card allows us to pay even though we don’t have any money in our account. This money that we do not have is given to us by our bank and is therefore a loan that we borrowed from our financial institution. The money we owe the bank must be returned when our financial institution tells us to, in addition to paying interest on it.
To get a credit card, the bank needs to study our financial situation, making sure that it is not given to someone who will not be able to return that money in the short or medium term.. He makes sure that we are solvent and studies our viability. Even if they give it to us, we have to keep in mind that the credit card also has a limit and it will not be possible to keep asking for loans indefinitely.
The means of restoring the credit, that is to say the money that the bank has lent us, are varied, being the main 3:
- At the end of the month: It is carried out on a day of the following month, which day is known as the settlement day and is specified in the contract.
- Percentage. A percentage of the credit will be paid each month.
- Fixed fee or “revolving”: consists of paying a fixed fixed amount.
2. Ease of obtaining
There are also differences in how easy it is to get a debit card and a credit card.
Debit cards are the easiest to get, because to get one you just need to have an account with money or the bank to open an account.. Depending on the type of account we have with our bank, our checking account can be made up of a primer and a debit card or, directly, just have the debit card as a method of withdrawing and using money. .
In the case of the credit card, it’s a bit more complicated. Since no bank is going to give us their money like that, financial institutions make sure, before giving us a credit card, that we are people who can return the money they leave us. If the bank doesn’t think we’re creditworthy, they won’t give us a credit card; in case he determines the maximum limit of money he will lend us.
Another interesting difference between the two types of cards is the commissions paid for each of them. It depends on each bank and there is usually an annual fee for each type of card. However, the generally cheaper commission is for debit cards. As each bank is different, the commissions that can be charged to us for the cards are a very important aspect to consult before making any type of card in any type of bank.
4. Withdraw money from ATMs
There are also differences between these two types of cards when it comes to withdrawing money from ATMs.
As a rule, if the debit card is used at an ATM of the same financial institution, no commission will be charged. Debit card works like lifetime cards, and there are even checking accounts that only have cards to be able to get money on these machines.
however, if the money is withdrawn with a credit card, the bank will charge interest when paying the card balance, Which are generally quite high reaching 20% per year. The financial institution will charge us interest to advance this money to us, as the cash withdrawal with our credit card is made on the line of credit granted to us by the bank, and not from our own checking account.
That is why it is never recommended to use your credit card to withdraw money from an ATM, even if it is an ATM from our own bank. This should only be done in cases of force majeure and there is no balance in the account.
5. Discounts and insurance
A point in favor of the credit card is that while shopping there are cards that offer us discounts at certain establishments, give us points associated with purchases or give us benefits based on the monthly amount spent. Outraged, credit cards usually have a number of free insurances such as protecting us in case we buy a faulty itemAlthough debit cards do not have this type of insurance and do not offer discounts.
Debit and credit cards are very convenient in our daily life. Credit cards are a good option in case you need financing for unforeseen events or expensive purchases, but you should also understand that this money that the bank gives us will have to be returned and until it is done, we will be indebted to our financial institution. Not controlling what gets paid with the credit card can lead to serious debt.
In contrast, debit cards are just a quick way to pay with our own money without resorting to cash. Using these cards involves spending money from our own checking account, and once this is complete we will not be able to pay with the card until we have returned money. ‘money in our account. This has the disadvantage that if we run out of money in a one-off situation, we cannot pay, but it also has the advantage of not going into debt with the bank.
- Tolentino-Morales, J. (2016). Credit vs. debit: which card is right for you? Mexico. The Economist. Retrieved from: https://www.eleconomista.com.mx/finanzaspersonales/Credito-vs-debito-que-tarjeta-le-conviene-20160202-0159.html.
- Gil, S. (sf). Difference between debit card and credit card. Economipedia. https://economipedia.com/definiciones/diferencia-entre-tarjeta-de-credito-y-debito.html.