10/13/2022
As promoters of healthy personal finances, we understand that the habit of using a debit or credit card equally can be confusing. However, both banking products have some features you may not be aware of.
It is precisely the differences between credit and debit cards that we are going to detail at greater length.
What is a debit card?
In the U.S. financial context, a debit card represents a plastic generally associated with a checking account. It is a product that allows you to make various financial transactions and is intended to expedite common or current expenses.
- Annuity: Ask
- Free debit money in: All Bank of America ATMs
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- Free debit money in: All Chase Bank ATM
- Annuity: Ask
- Free debit money in: Wells Fargo ATMs
- Annuity: $ 0
- Free debit money in: All Citibank ATMs
Depending on the bank and the technology related to this product, it uses a chip that stores your financial data. This chip includes a Personal Identification Number (PIN), which is usually a 4 to 6 digit number and serves to endorse transactions.
In addition, it can incorporate a magnetic stripe, which, although it has fallen into disuse, works to read the debit card information.
When the entity grants you a debit card, you can carry out several banking operations with the money you have deposited in your current account. The most common ones are:
- Cash withdrawal from an ATM.
- Online/offline payments or purchases.
- Balance inquiries.
- Transfers within the country.
- Obtaining cash-back at certain affiliated merchants.
How does a credit card work?
Unlike a debit card, a credit card is a plastic given to you by the bank that has a credit limit that you can use while you have enough balance.
This kind of line of credit represents an amount that the bank lends you to use at your discretion and is subject to an interest rate that is applied when you repay it in several statements.
Credit cards are not tied to the balance of any checking or savings account you have with the financial institution; it has its own balance. It is considered revolving financing that you can use over and over again as long as your balance is positive.
To make sure you pay the interest, the bank applies a cut-off date and a payment date, generally once a month.
As for the transactions you can make with a credit card, they are not very different from those you can make with a debit card. You have the opportunity to withdraw money from the ATM (if you have the PIN), shop in physical or online stores that accept these plastics, transfer balance from one card to another and accept charges over the phone.
Another key feature about credit cards is the benefits associated with these plastics. People not only apply for them not only to improve their score or have more financial support, but also for a series of perks.
- Annuity: $ 0
- Credit limit: $ 150
- APR: 17.49%
- Annuity: $ 0
- Credit limit: Ask
- APR: 19.49%
- Annuity: $ 0
- Credit limit: Ask
- APR: 22.49%
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- Credit limit: Ask
Such perks usually include: purchase protection, rewards, miles, travel insurance, rewards, extended warranty, cash-back and more.
Finally, credit cards are financial instruments whose limits depend on the type of plastic offered by the bank, the credit score and whether you are a merchant or not.
Thus, there are the famous Gold, Platinum, Black and other categories that give a certain status to the cardholder. Unlike debit cards, an entity may reject the application if it deems it convenient.
Differences between debit and credit cards
Knowing the basics about these plastics, we can summarize their differences as follows:
- Credit cards work as a revolving credit not linked to an account, which you can renew by paying and have a limit.
- Debit cards are linked to your checking account, have a daily limit and your spending depends on the funds you have.
- Credit cards are subject to an interest rate (if you do not pay the balance in full), include a cut-off date, a payment date and a minimum payment.
- Debit cards are used for daily transactions and, in some cases, offer cash back at various merchants.
- Credit cards include a series of benefits that you do not get with other cards, such as rewards, insurance, refunds, protection when shopping or traveling, among others.
Choosing a credit or debit card will depend largely on how you want to manage your personal finances. Both instruments are very useful and can help you get more important financing. In Busconómico's comparator you will find the most attractive credit cards from the best institutions in the country.
Español: Diferencias entre tarjetas de crédito y débito