Difference between debit card and credit card

A debit card It is a financial instrument that allows the user of a bank account to withdraw or use their funds electronically, without the need to use cash.

A credit card It is a financial instrument that allows the user of a bank account to access electronic money as a loan. In this case, the money is lent by the bank.

The difference between a debit and a credit card is that in the debit card the payments and withdrawals of money are taken directly from the user's funds. On the other hand, a credit card can be used independently of the current funds of the card user since the money does not come from their account, but from the bank, which is the one who finances the acquired debt..

What is a debit card?

A credit card is an instrument provided by banking institutions to their users so that they can access their funds and mobilize them, either through purchases at points of sale or through withdrawals at ATMs..

Although each bank has its own rules for issuing debit cards, in general terms the applicant is required to be a bank customer, fill out a form with their personal and bank details and wait for the approval of the institution to receive the card..

Once the user has received the card, they must create a password that they will use both at ATMs and at the points of sale that request it. From that moment on, all transactions carried out will be made with the funds available in the user's accounts..

How to know if a card is debit?

For security reasons, and to be able to standardize banking operations in the world, debit cards share some characteristics such as the manufacturing material (plastic) and the measurements (8.5 x 5.3 cm).

In addition to this, they also share other characteristics:

Front of the card

• Bank logo: allows you to quickly identify the institution.
• Card number: this number varies but is usually no more than 16 digits.
• Name of owner of the card.
• card expiration date: usually only includes the month and year.

Back

• Magnetic stripe: currently most also include an electronic chip).
• Security code: generally three digits.
• A panel for the user to sign the card.

Types of debit cards

These are the four most popular types of debit cards:

Card with debit system on-line

It is a type of debit card that is characterized by the fact that the transactions are immediately reflected in the user's account. It is the most common type of card.

Card with debit system offline

They are cards that work like a credit card when used at a point of sale; however, the funds come from the user's account, not from the bank. Its usefulness as a credit card is only for operational purposes between points of sale and banks.

Card with electronic purse system

They are debit cards that do not depend on an external account to mobilize funds, since the money is stored electronically on the card's chip.

Card with prepaid system

These are cards that do not require the user to have a bank account, since the funds can be reloaded directly. This option is widely used by both very young people who are starting in the banking system or people who are not banked but who require an instrument to save and mobilize their money.

What is a credit card?

A credit card is a financial instrument issued by banks, which allows users to pay for purchases or withdraw cash even if they do not have sufficient funds..

This means that the credit card is a financing instrument: the bank is lending a certain amount of money to a user, for a certain time and with an interest rate.

Therefore, when using a credit card, the user acquires a debt that must be paid within a previously established period..

How to know if a card is credit?

Credit cards have certain common characteristics. Many of them are for international use, which implies standards of design and operability. What varies is the arrangement of the elements:

Card front

Embossed card number - digits can be felt by touch.

• Bank logo
• Card type logo: Mastercard, Visa, American express or others.
• Microchip: the card data is stored there.
• Hologram: it is a security element that allows to validate its authenticity.
• User name: usually contains the first surname and first name.
• Due date: month and year.

Back

• Panel for user signature
• Security code: generally three digits.
• Magnetic stripe: stores a part of the bank details.

Types of credit cards

Credit cards can be classified in two ways:

Because of its level of funding

• Classic card: is the card with the lowest level of funding.
• Gold Card: it has a higher financing limit than the classic card.
• Card platinum: has a higher level of financing than the gold card.
• Card black: are only granted to bank users with a high level of income.

Because of the technology they use

• Magnetic Stripe Cards: were the first cards, but their use is decreasing.
• Microchip cards: the chip has higher levels of security than the magnetic stripe.
• Cards contactless: they do not require entering them in the terminal, since they are activated when it is brought closer to the device.

See also:

• Simple and compound interest.
• Difference between assets, liabilities and equity.