Difference Between Debit and Credit Card
The main difference between debit and credit cards is based on the fact that the former are always associated with the balance that the client has in the current account, while credit cards allow you to operate with money borrowed from the financial institution.
When money is withdrawn from an ATM with a debit card or a payment is made with it, the amount of the operation is automatically deducted from the balance of the associated account.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.
On the other hand, when the credit card is used , the bank is the one that is lending the money. We will have to return that money the following month or in several installments paying interest on it. In this case, the financial institution advances the money regardless of the balance in the account. For this reason, before granting a credit card, the bank studies the viability of the client, making sure that he is solvent . Still, the credit card has a limit.
Payment methods of a credit card
The credit can be “paid back” in three ways:
- At the end of the month: Normally it is carried out one day of the following month. This day, known as settlement day, is mentioned in the contract.
- Through a percentage: Every month we will pay a percentage of the credit.
- Fixed quota: This modality is known by the name of revolving . It consists of paying a fixed amount established.
Credit cards are defined as a financial instrument. They allow you to pay in installments and make purchases without having to disburse the total payment. On the contrary, debit cards are a means of payment in themselves: the amount is charged directly to the holder's account and is deducted directly from the balance.
Differences in commissions and discounts in the different cards
Another difference between both types of card lies in the commissions that are paid for each of them. Depending on each bank, they usually charge an annual commission for each type of card, with the commission for debit cards usually being cheaper than in the case of credit cards. However, this information about the commissions is interesting when choosing the bank where you want to contract the current 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, normally you will not have to pay any type of commission. On the other hand, if 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 the experts, "the credit card should never be used to withdraw money from an ATM, unless it is a force majeure 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 type of discount associated with them.
Finally, if the debit card is used irresponsibly, the cardholder may end up with no money in the account, but they cannot spend more than they have. However, misuse of credit cards can lead to severe debt.