Surely you have different types of bank cards in your wallet. There are credit, debit, purse , commercial … and each of them fulfills different functions. Perhaps, you have not noticed some subtleties that can make a big difference when planning your personal finances. Do you know the advantages of each one of them?
Credit and debit cards
These two types of cards are usually the most common among users. Like all cards, they are made of plastic, have your name printed on them and you can pay with both at any store . The difference between credit and debit cards lies in the type of financial product that supports them ; credit or debit.
In other words, the difference between a credit and debit card has to do with the method of payment, the financing possibilities they offer and the interest that you could face in each case.
Before looking at the differences, let’s define each type of card:
- Debit card : this type of card is linked to an account from which the amount of the purchases made with it is debited. That is, withdraw the money directly from your account. In this sense, it is necessary to maintain a balance to be able to use this means of payment.
- Credit card : this type of card, for its part, allows access to borrowed money through a line of credit.
Difference between credit and debit card
We can establish differences between both cards according to different criteria:
- According to the payment method : as we have already said, when buying with a debit card, the payment is charged directly to the account to which it is linked. However, with a credit card you can pay even without funds. This is because there is the possibility of postponing the collection until the following month. The disadvantage in this case is that you incur a debt with the bank. Anyway, you can choose between paying a limit at the end of the month, a percentage or a fixed fee.
- According to interest: unlike the debit card, the credit card charges the holder some interest when withdrawing money or splitting a payment.
- According to the financing possibilities: while debit cards are a means of payment in themselves, credit cards allow you to finance purchases. In this way, you can pay in installments and make purchases without having to pay the full payment. Therefore, we can say that a difference between a credit and debit card is that the former carries an implicit credit grant from the bank.
- Based on the amount available – The credit line is determined based on the applicant’s credit rating.
- According to the debt : as we can conclude, in the case of the debit card there is no debt, while the holder of the credit card must pay their expenses every month.
- According to the limits to withdraw money from an ATM : another difference between credit and debit cards has to do with the amount of money that can be withdrawn with them at an ATM. In the case of the credit card, the limit is set by the type of card — normal, silver, gold… -. The limit implies that the entity will not pay charges above the amount set in each case. In the case of debit cards, the limit is the amount of money in the associated account. However, it is normal for banks to set a daily withdrawal limit for security.
- Depending on the card issuer : In general, debit cards are issued by the bank since they are associated with a bank account. However, credit cards can be offered by banks and financial entities without the need for us to have a savings account in them. They also offer credit cards, financial credit institutions or payment institutions. In any case, you must always provide an account number to link the card.
As you can see, the difference between credit and debit card goes beyond the form of payment. Depending on the case, you should use one or the other. You might think that a credit card can be of great help in case of an unforeseen event. However, try to make smart use of these types of cards, since debts and interest could compromise your financial situation . In the event of a sudden, it is best to have an emergency fund . In any case, if you have doubts, be sure to consult a specialized advisor.