Difference between credit and debit card

The main difference between a debit card and a credit card is the form of payment. On a debit card, the payment is charged directly to the cardholder's current account. Therefore, it only allows charges up to the limit of the funds in the account. With the credit card you can pay even if you don't have funds, as you can defer the charge until the next month. In this way, the holder incurs a debt with the bank.

Before granting a credit card, the bank studies the viability, making sure that the customer is solvent and assigns a maximum credit limit for that card. The credit can be paid back in different ways: at the end of the month (an established day of the month following the purchase), by percentage (paid each month) or a fixed rate (this modality is known as revolving, and consists of paying an established fixed amount).

Credit cards make it possible to finance: pay in instalments and make your purchases without having to pay the total amount of the payment as long as the limit granted by the Bank is not exceeded. This means that the holder is charged interest if they decide to defer payment. With debit cards, on the other hand, the amount is charged directly to the cardholder's account and deducted directly from the balance.

Credit card vs. debit card at the ATM

There are also differences if you want to withdraw cash from an ATM. If you use your debit card in an ATM of the financial institution that issued it, normally, you will not have to pay any commission. However, if you withdraw cash with your credit card, the financial institution may charge you interest for advancing that money. Cash withdrawals by credit card are against the credit limit given to you by the bank and not against your current account.

On the other hand, credit cards usually have a series of free insurances that, for example, protect you in case you buy a defective object. Both debit and credit cards are very practical in your daily life and in the case of the latter they are a very good option in case you need financing for contingencies or purchases of large amounts.