Does it pass in credit or debt? When in doubt, the ideal is to understand how these two types of cards work, as well as the advantages and disadvantages that each has. Not sure which card to use? Understand the difference between credit and debit cards here at Low Interest.
The use of cards has become increasingly popular. Because you don’t have to carry cash or checks with you to make purchases, many people choose the convenience of using the card. But, is there a difference between using a credit or debit card?
How does a credit card work?
This type of card is used as a kind of loan, made by the bank or the company responsible for its distribution. Thus, by using it, you will be buying the product instantly, but will only make the payment at the expiration of the card.
For example, suppose you have a credit card that expires on the 10th, and you made a purchase on July 15th with it. The merchant will receive payment for the cash sale, as the card will be paying him, but you will not pay this invoice until August 10, which is when the card expires.
How Does a Debit Card Work?
This type of card is the most similar to the cash payment. This requires that you have a balance in the checking account of the card’s home bank. Thus, when making a purchase, the amount is deducted from your checking account.
So suppose you have $ 500 in your checking account, and you used the debit card to buy a product worth $ 200. Immediately, this amount is deducted from your account, and it becomes $ 300.
But be careful! If you have no current account balance and use the debit card, the amount can be deducted from Overdraft, generating high interest debt. Therefore, it is recommended that you always make sure that you have enough money to sign in before using your debit card.
Step in Credit or Debit?
There is no way to define which one is the best. They are different services, and anyone can use both. And in case of lack of financial control, due to the existence of Overdraft, the risk of indebtedness is practically the same for both.
So we offer a comparative table below where you can know when to use credit and debit cards:
|Credit card||Debit card|
|You buy the product now, but only pay when the card expires.||The purchase price of the product is deducted immediately from your checking account.|
|Your bank or card issuer will make a loan to you, and the payment will be due on the invoice due date.||Can only be used if you have a checking account balance, or if you enter Overdraft. Other than these situations, it is not possible to use the card.|
|The credit limit that can be used is usually renewed on the business day following the card payment.||The amount limit that can be used is set by the balance you have in your checking account.|
|It can be used to split purchases, with or without interest, depending on the number of installments and the store.||Cannot be used to split purchases.|
|Use is best for larger purchases, such as when purchasing furniture, appliances, or even monthly purchases.||Use is best recommended for daily, low value purchases for better financial control.|
Basic and Differentiated Credit Card
There are two types of credit cards, the plans differ by the following:
Basic Credit Card
It is the card that can be used to pay for goods and services, offering the credit line usually after the payment of invoices.
Differentiated Credit Card
In addition to offering payment for goods and services, it also adds benefits and rewards such as frequent flyer programs, discounts on purchases, insurance, among others.
It is important to know that the annuity of this type of credit card tends to be more expensive than the basic credit card annuity, but this must be confirmed before you finalize the contract to obtain the card.
How to cancel a Card?
It is possible to cancel these cards, and their suppliers are obliged to cancel them regardless of the existence of debts. But the cancellation does not pay off the debt. That is, it is necessary to make the payment anyway.
How to cancel credit card
Simply make payments for card charges, or transfer them to direct debit, contact your provider, and cancel.
How to cancel the Debit Card
You must go to the bank branch where you have a checking account and request cancellation. If you are indebted to the overdraft, it should be paid. If you are unable to pay your debts, try to negotiate directly with your bank or card issuer for a monthly installment to pay off and cancel your card.
After you cancel, break your card. Because it has your personal data, by destroying it, you prevent it from being used for fraud. Can you understand the differences between credit and debit cards? So ask other questions and follow more stories here at Low Interest.