When we make a purchase with a card, the seller always asks if it's a credit or debit card. But what are the differences between credit and debit?
The basic difference is that the debit for purchases is always in cash and credit for purchases is in installments. When you buy with debit you are taking the money that is in your current on credit you are asking for a loan from the bank.
Advantages of using a credit card
Although many people are afraid to use a credit card, credit gives many advantages to customers. Since credit rates are higher than debit, there are more risks involved, credit cards give customers advantages.
The main advantage of buying on credit is later on a pre-defined date, another advantage that credit provides is the points in loyalty programs that give discounts on purchases. Depending on the bank, you may charge an annual fee to have more promotions and discounts.
One advantage of using a credit card that they already have depending on insurance may vary depending on the card type and limit. One of the most common and talked about is travel insurance that entitles the customer to pay for health treatments if needed during a trip.
It is recommended to use credit only when the cash purchase does not have a discount and never use the credit card as income spending money that you do not have to pay.
Advantages of using a debit card
For those who do not have control over spending, debit is a better solution than credit as the money comes directly from the checking account and only what is spent is spent.
Debit has much lower rates than credit and the risk for banks too, since payment is made with money that is in the customer's account. It's also easier to get a debit card as you don't need to do a credit analysis, you just need a bank account.
In debit, there is usually no accumulation of promotions and bonuses in loyalty programs. That's why they don't have an annual fee.
Despite the debt, there is no loan because it is related to the amount in the current account. Some banks may have overdrafts related to checking accounts, being the most expensive credit in the country, a customer without control may end up falling into the snowball without realizing it.
After all, use credit or debit?
Depending on the type of client, lifestyle, goals, etc., one card may be better than the other. Nowadays the cards already come with 2 functions and it is up to the customer to choose at the time of purchase.
The Credit Card is recommended to be used when there is no discount on the cash purchase, it should never be used as extra income, as it has a chance of losing control and being penalized.
The Debit Card is the closest we have to digital money which is something I argue that it exists en masse because all purchases are in cash.
Currently, the financial market, but specifically banks, is undergoing a revolution with the entry of fintech and the creation of open banking. With all these revolutions, customers should be aware that there is always a smart guy on all sides with an eye on your money.