The choice of a bank card must be approached with special attention. In exceptional cases, the customer becomes familiar with the terms of the contract: how much the service costs, how much can be withdrawn without commission, the percentage of cash back, and other important conditions for the maintenance of the card.
Bank cards are issued to receive salaries, payment for goods and services, transfers, or use abroad. Therefore, for your card to meet your requirements, you need to approach the choice of the card more seriously.
How is a debit card different from a credit card?
Many debit and credit cards have similar characteristics. Both cards typically carry the logo of a payment system, such as Visa or MasterCard, and both can be used in retail stores to pay for goods and services. Also, both cards contain the name and surname of the holder, as well as the card number and its validity period.
What is the main difference?
However, the key difference between the two cards is the money and who owns it: it can be the customer’s or the bank’s own funds. When a customer uses a debit card, the money comes directly from their bank account. When you use a credit card, the purchase is charged to the credit line, which is subsequently billed, that is, the money comes from the bank’s funds.
A debit card with an overdraft service linked to the customer’s account can be issued to cover overspending. A credit card has a certain credit limit, and if a consumer tries to spend more than that limit, the card will be rejected in the transaction, as for debit cards, he will be able to use the total amount he has in his balance.
Key facts to consider:
- A credit card is a debt instrument, a debit card is not.
- If the overdraft service is not connected to the card, the debit card user can only spend the money that is available in their account.
- A credit card is opened to use the funds provided by the bank.
What is a debit card?
Debit cards offer the convenience of a credit card, but they work differently. When you make a purchase, debit cards withdraw money directly from your bank account. They do so by conserving the amount of the purchase. The merchant then submits the transaction to their bank and it is transferred to the merchant’s account. Depending on the amount of the purchase and your bank, the money will be immediately withdrawn from your account or the bank will hold it for 24 hours or more.
You can use your debit card to withdraw cash from your account at an ATM using a unique personal identification number (PIN). When you use a debit card to make a purchase, you may be prompted to enter a PIN or simply be asked to sign for the purchase, similar to a credit card.
What is a credit card?
A credit card is a debt instrument that is used for financial transactions instead of cash, check, or debit cards. Depending on the creditworthiness of its owner, a credit card can have a high or low credit limit. When you use a credit card, the purchase amount is automatically added to your outstanding balance. Interest rates on credit cards can be quite high. This is the main way that banks make money.
It is important to know that responsible credit card users can often earn points and rewards from card issuers, and positive use of credit helps build and maintain a high credit score.
How do you decide which is better, a debit card or a credit card?
Of course, it all depends on your current goals and tasks. Getting a credit card is worth it if you want to have greater financial freedom and quickly pay what you need right now, without delaying it for later. If you need a financial instrument to store your own funds, which allows you to withdraw cash with zero or minimal commission and is suitable for any purchases and payments, transfers to natural and legal persons, then you need to open a debit card.