Credit vs. Debit Card

Difference between credit and debit cards

Debit and credit cards are very useful and practical payment instruments that allow you to manage your finances safely and comfortably. Both have two different modalities and features so many customers who are just starting in the banking world wonder what are the differences between credit and debit card. In the following post you will know them in detail.

Credit and debit cards are both payment instruments issued by banks or authorized financial institutions that offer their customers these products to manage their money and credit quota. Both allow you to make purchases at points of sale and use them at ATMs to make balance inquiries, payments and cash withdrawals. These are their similarities, but the differences between credit and debit cards are much more noticeable and give them their respective features:

Credit card

It is a separate product from your checking or savings account, so it has different requirements and is not included when you open the account.
It allows you to make purchases and cash advances from your credit limit, i.e., it is a loan from the bank and you can pay it back in monthly instalments.
The credit card has a life of its own not associated with the bank account.
It has interest rates associated with the loan that is generated when using it, and in the case of cash advances the interest rates are higher.

Debit card

It is a product directly associated to your savings or checking account, so it is automatically assigned to you without additional requirements.
You can only make purchases and cash withdrawals at ATMs if you have a positive balance in your bank account, so it does not represent a debt or loan.
It is automatically linked to your bank account
It does not charge you commissions or interest for making purchases or cash withdrawals.

Credit or debit card?

Debit cards are more common since they do not represent a risk for the bank because they are linked to the customer’s bank account. Now, if you have both types of cards, you may wonder which one is more convenient to use. Well, this will depend on the operation you are going to carry out, so knowing the differences between credit and debit cards will be very useful:

If your purchase is for perishable products such as food or casual dining, it is best to have your own funds and use the debit card.
If you are buying something more durable and that has a higher cost, such as an appliance, you can use the credit card to obtain financing and pay for it in instalments. Just remember that the monthly payment is essential to maintain your good credit score.

Now that you know the differences between credit and debit cards, you will be able to make better use of their functionalities, benefits and features to make your personal finance management more efficient. If you have a credit card, remember to pay it monthly to continue enjoying its benefits and not create a bad credit score.