Credit cards and debit cards, how do they differ?
Greater control of spending, forcing the precarious economic situation of many families, has led to an increased use of debit cards versus the credit, and a decline in deferred payments. According to the Annual Barometer has made MasterCard on the use of cards in Spain, debit cards are becoming a boom since, in 2009, began to flare up the crisis, especially on purchases in stores and over the Internet. What distinguishes one from another credit card debit? In the following article the main differences between the two cards are explained.
In 2011, the Spanish financial institutions 17.05% more expensive fees charged half their customers by having a debit card, while credit rose only 9.65%. Control of costs carried out by consumers is leaving notes on card purchases and the continued decline in deferred credit modality, which has reached its lowest value since 2011. A 12.1% of holders card uses deferred payments, compared to 14.1% who did last year. This result confirms the strong rise of debit cards, since there was the worsening of the crisis, in 2009, especially for retail purchases and pay via the Internet.
The cards provide great convenience to users when making payments or withdraw money from an ATM and give security, not having to carry cash. In this sense, Spain is the European country with the largest network of ATMs and POS terminals. But, what is the difference between a credit card and a debit card?
Features debit cards
Debit cards are a means of payment and its main attraction is that, with them, you can keep track of what is spent.
With these cards you can make cash withdrawals at branches and ATMs, besides making payments in shops. In both cases, when you operate with a debit card, a direct charge is generated by the purchase amount in the current account of the client, so it is necessary that there are sufficient funds to meet the payment or withdraw cash. The expenses are paid with debit cards instantly discounted the account balance. This is the main difference between debit and credit.
They are useful for everyday purchases. By using the funds deposited in the checking or savings account to which they are associated, no interest or deferred payments.
To have a, you must have a checking account at the bank that issues the card. Almost anyone with a demand account, you can get a debit card, so it is easy to get one.
If the consumer has trouble controlling its debt, debit cards can be an alternative. If there is no money in the account, you can not make purchases, so the possibility of excessive debt is avoided.
Although it is possible to remove all existing money in the account associated, for security reasons, entities, together with the client, they provide a daily limit, especially for withdrawals from ATMs. If there are insufficient funds in the account, the bank may deny the operation or, well, can anticipate the amount needed to make the payment. In this case, should exercise caution and monitor account balance as they leave an account overdrawn generates very high costs for the user in the form of repayments of payments, credit memos related interest and bank fees.
They have less protection and secure than credit cards. If you buy a commodity and this suffers some sort of damage, while credit card offers insurance break with the debit card does not have this type of insurance.
Although it depends on the bank, the fees charged for possession and use of a debit card usually cheaper than in the case of credit. Some banks will not even charge anything for them. Also, if the debit card is used at an ATM of the bank itself, you will not have to pay any commission.
Special features of credit cards
Credit cards, as well as being a means of payment, are also a form of financing, allowing shop without the obligation to pay all the money at once and with the possibility of returning in installments.
Unlike what happens with debit cards, credit cards allow the user to make payments or obtain money, up to a limit, without having funds in the bank account at that moment.
Being a card that allows you to have a credit account, provided by the entity that issues it, for obtaining the clearance of payroll or pension or guarantee a stable income is required.
Its use has the same consequences as having a credit or any other form of financing: the user is obliged to return the money and pay the established interests.
The available credit limit must be specified in the contract card, but may vary over time, with the consent of both the cardholder and the financial institution.
The credit limit means that the bank will not consider payments above a certain amount. There is a maximum credit limit for each card category ( "normal", "silver", "gold", "platinum", etc.) and the entities, according to their risk policy and the financial solvency of each client, they can adjust . In addition, the user can also request a change in your credit limit. If you want to decrease, the entity will not inconvenience you but if you intend to increase it, you will need your permission. When an entity accepts the customer exceeds the credit limit, can arise overextended account, which have to be repaid with interest and fees under the contract card.
Bank payments to be made in the manner and deadlines, usually in the first days of each month. Additionally, you can choose different payment options:
monthly payment for all: is the simplest and most traditional way. All expenses incurred during the month are paid from the account on the first day of the following month. The user receives once every 30 days an extract with the operations in the previous period and the final balance that will be charged in the associated account. In this mode, most issuers do not charge interest.
deferred payment: is the form of "soft quota" or revolving. Allows the holder to finance their purchases according to your needs, you choose how much to pay each month. With these cards may defer payment in a fixed or soft quota. If the monthly fee is reduced, there may not be enough to pay all the interest generated so far, so the debt will increase and produce new interests. You have to control the growth of debt that accumulates in each settlement, as it can grow exponentially. The deferral of payments should be used only in exceptional cases because their interests are very high. So if financing when buying a commodity is needed, we should not use the credit card.
Our paying card balance each month, you can get different discounts that benefit and points associated with card purchases. Some cards offer monthly discounts depending on the amount spent monthly, others give points to hotels or flights or points redeemable for gifts, etc.
A great benefit of credit cards is protection against fraud. By the time the user notifies card fraud, you are no longer liable for the amounts defraud. Also, if a purchase of a defective object is realized, it is also protected by insurance card.
You can have money in case of unforeseen emergencies. However, these cards can incite spend money you do not have and borrow excessively.
If money from an ATM with credit card is extracted, it charges a number of interests to pay the balance depends on each type of card and each bank, but they are usually quite high (around 20% annually). Therefore, you should never use the credit card to get cash from an ATM, unless it is by force majeure and no account balance. Although its use is a very convenient way to make payments, keep in mind that it is one of the most expensive credits there. The APR (Annual Percentage Rate) ranges between 11% and 25% and in case of delays or non-payment of dues, banks charge very high fees and additional fees.
Misuse of the cards may result in unpleasant consequences consumer. If your debit card is used irresponsibly, you may run out of money in your account, but will not be able to spend more than you have. However, misuse of credit cards can lead to large debts.