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Debit and credit card: what is the difference and which is more profitable?

 What is a debit card and how does it work?

A debit card is a banking product (with or without a physical plastic carrier) that provides its owner with quick access to money placed in a current bank account. Initially, a debit card is issued with a zero limit. You can make purchases, withdraw cash or transfer money after replenishing your account.

To receive a debit, it is enough to contact a bank branch with a passport, often even a preliminary application is not required, since many financial institutions issue instant non-personalized cards. Generally, when it expires, the debit card is reissued automatically.

Why do you need a debit card and who may need it?

A debit card is needed for employees, pensioners, students, mothers on maternity leave – in general, everyone who uses money in everyday life. Some banks offer to open a debit card for children.

With a debit card, you can:

  • receive wages from the employer, pensions and social benefits from the state;
  • pay for purchases;
  • withdraw cash from ATMs and bank branches, as well as at the cash desks of some stores;
  • make transfers in favor of individuals and organizations, including paying for utilities, communications, etc.

Features of debit cards

A debit card can be issued and serviced both for a fee and free of charge. Usually, banks charge a small fee – up to 100 rubles per month for SMS or push notifications about transactions. These costs can be compensated by cashback – a reward for transactions paid for by the card. Some financial institutions also charge interest on the account balance.

According to the law, employees can choose the bank in which they will receive their salaries, and pensioners can choose their pensions. Often, banks pay a small welcome bonus for transferring service to them.

Many financial institutions have partnership agreements with other credit institutions, so their customers can withdraw cash not only from their own ATMs, but also from the partner network on preferential terms.

What is a credit card and how does it work?

A credit card is also a payment banking product (on a physical or virtual medium), with the help of which the owner gets access to a credit line within the established limit.

In most banks, to obtain a credit card with a small limit (on average up to 100 thousand rubles), you only need a passport. To approve a larger amount, you will need to provide a set of documents (an additional identity document, a certificate from the employer, a certificate confirming income in the form of 2-NDFL or in the form of a bank, etc.).

Initially, banks approve a minimum credit limit for a new client, which will gradually increase if:

actively use the card;

prevent delays in payments.

Important: the maximum limit on the card, as a rule, can be obtained from the salary bank.

What is a credit card for and who may need it

A credit card will come in handy:

when you need to make a large purchase, but your own savings are not enough;

if additional funds are urgently needed;

to be used as a deposit (when booking hotels, renting cars, so as not to spend your own money that is needed on a trip).

Apply for a credit card

A credit card will be useful for people with a permanent source of income in order to have some money on hand, provided that the amount spent will be easily returned to the bank without paying interest.

Features of credit cards

Thanks to the grace period (also called the grace period), a credit card can be used free of charge – at this time, the financial institution does not charge interest on the borrowed money. Depending on the conditions of the bank, the interest-free period can last from 55 days to one year.

Distinguish between the so-called honest and dishonest grace. In the first case, each billing period or a new purchase opens its own preferential “corridor”. In the second, until the first debt incurred on the card is fully repaid, a new interest-free period will not open. Simply put, with each new month, the client has fewer and fewer grace days.

Each bank has its own conditions and terms of the interest-free period – they should be specified in the contract, as well as in the mobile application.

During the grace period, it is enough to make a monthly minimum payment (2-10% of the amount spent), and at the end of the term to repay the entire debt in full, then the bank does not need to pay interest for using borrowed money. Violation of the rules (skipping the minimum payment, withdrawing cash or transferring money from the card, late payment of commissions, etc.) terminates the grace: interest will be accrued on the entire amount of the spent limit from the moment the debt arises, and a fine will be charged on the overdue part of it.

Usually, transactions other than paying for purchases (for example, cash withdrawals, transfers) are set at an increased percentage and commissions, so it is highly recommended not to spend money from a credit card for other purposes. Although there are exceptions when some banks include cash withdrawals and transfers during the grace period and/or do not charge commissions for their completion.

As in the case of a debit card, the issuance and maintenance of a credit card can be either paid or free, and cashback can be credited for purchases on the card.

How to choose between debit and credit cards

It is wrong to raise the question of which card is better – credit or debit, because they are designed to solve different problems. Which type of cards to give preference to depends on the needs of the client:

for the daily use of own funds, cash transactions and transfers, reserving small savings, you need a debit card;

To make non-cash purchases at the expense of borrowed funds, to receive maximum bonuses from the constant turnover on the card – credit.

It is likely that you need both a debit card and a credit card.

Things to Consider When Choosing a Debit or Credit Card

When choosing a debit card, ideally, you need to find the most profitable, and for a credit card, calculate how much it will actually cost.

There are many free card offers on the market, but even the cost of paying for the issuance and maintenance of a debit card can more than pay off through bonuses. The service of some cards becomes free if you make purchases for a certain amount per month, maintain a minimum balance on the card or open a deposit. Analyze how actively you will use the card and what operations you will most often perform on it:

if the card is needed mainly for cash withdrawals, choose among those banks whose own and partner ATMs are widely represented in your location, or offers with free withdrawals in the terminals of any financial institutions;

if you make a lot of different non-cash purchases, it is beneficial to have a card with cashback for everything;

if certain items of expenditure are clearly distinguished, look for cards with increased cashback in these categories or co-branded;

if you make a lot of transfers, apply for a card with a free interbank market;

If you keep a large amount on the card and want to freely dispose of it, consider cards with interest payments on the balance.

Next, carefully study the terms of the loyalty program and the methods of calculating rewards and interest:

cashback can be paid not in money, but in bonuses, and in order to exchange bonuses for rubles, you often need to accumulate a certain amount, often points are converted at an unfavorable rate for the client, and sometimes bonuses can only be spent on goods from the partner catalog;

the amount of cashback or the interest rate on the account balance can be tied to the turnover on the card;

As a rule, a maximum limit is set on cashback and on the account balance;

Banks pay an increased interest on the balance only in the first 2-3 months, then the rate decreases.

Pick up a debit card

With the exception of paying interest on the balance, all of the above applies to the credit card as well. But the defining criteria for choosing a credit card should be:

the duration of the interest-free period, as well as whether it is “honest” or “dishonest” if you plan to constantly use the card;

Which transactions are subject to the grace period and which are not. Most often, customers are caught withdrawing cash. Firstly, if such transactions are subject to a grace period, then usually this rule is valid for a short period of time from the moment the card is activated. Secondly, when the advertisement talks about free cash withdrawals, it means no commission, and not the “preferentiality” of the operation;

interest rates for purchases, cash withdrawals and transfers in case of departure from grace;

Credit limit: it is dangerous to count on the maximum specified in the tariffs – the bank can approve a much smaller amount.

Frequently Asked Questions

Can I use a credit card as a debit card?

You can put your own funds on a credit card and use it as a debit card, but if a debt is formed on a credit card, the money will be debited to repay it. There is no interest accrued for depositing personal funds in a credit card account, but there may be a fee for cash withdrawals or transfers and/or a reduced limit on these transactions.

Can a debit card be made a credit card?

It is impossible to fully turn a debit card into a credit card, since these are different banking products with different terms of service. However, banks provide an overdraft service to some categories of debit card holders, allowing them to divert expenses to a small minus. The overdraft limit is stipulated in the terms of service, and the debt for overspending is repaid after the next replenishment of the card. Such a service is very useful when you urgently need to pay for something, and your own funds are not enough, but it should be remembered that there will most likely not be an interest-free overdraft repayment period.

Is a salary card a debit card or a credit card?

A salary card is a debit card that is opened as part of a salary project. The main source of its replenishment is transfers from the employer. The salary card has the functionality of a standard debit card, sometimes banks offer holders of such plastic preferential terms of service, while the costs of its issuance and maintenance are paid by the employer.

Is it possible to distinguish a debit card from a credit card by external signs?

Both types of cards are issued according to a single standard: on the front side of the plastic, the name of the issuing bank and the payment system, the 16-digit card number and its expiration date, as well as, if the card is nominal, information about its owner, are indicated. The only clue may be the marking “debit” (“D”) or “credit” (“C”) next to the icon of the payment system (“Mir”, Visa, Mastercard, UnionPay) or the status of plastic (Gold, Platinum, Supreme, etc.).

If you have several cards from the same bank, you can find out exactly which one is debit and which is credit in your personal account on the website or mobile application.

Conclusion

For everyday spending, without a doubt, you need to give preference to a debit card: it is simple and easy to use, the rules for its use are transparent and understandable. Although, in order to get the most out of a debit card, it is still worth studying in detail the conditions for calculating cashback and interest on the account balance, promotions and discounts from partners.

It is reasonable to use a credit card only when there is really a need to resort to borrowed funds or when there is absolute certainty that you are not in danger of “flying out” of grace. A credit card requires a lot of financial discipline, otherwise uncontrolled spending will turn into financial bondage. But if you carefully study all the pitfalls and possible pros and cons, a credit card will be a good assistant. 

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