Debit Card (ATM card) Vs Credit card.
Banks have made our lives so easy and free from hassles by providing many services. Many people understand only one function of banking system which is Account opening of customers and providing cheque book and a card. There are many functions which banks are doing behind the scenes and which is their source of income. Read more about how banks earn.
When we open a bank account with our bank they normally issue us a cheque book so we can withdraw money or pay someone when we want. They also issue a Card (ATM or Debit card) which facilitates us to withdraw money from Cash machine or Auto Transaction machine. This card is known as Debit card. So basically it is providing you facility to withdraw your own money which you had in your account. You can also pay in restaurants and shopping malls with this card. It also provides facility to do online shopping and pay for your ticket or hotel booking etc. So this is Debit Card which is letting you use your own money and many banks normally charge nominal fee to provide this service, on the other hand some banks do not charge anything. This card has many categories which provide you additional facilities e.g. extended limits of withdrawing money and doing online shopping. It will off course cost you money to make one to those premium Debit Cards.
Credit Card on the other hand is basically a loan provided by bank in shape of a card, so It lets you do shopping in restaurants and shopping malls and also pay to online stores. It also lets you withdraw money from Cash machines. So It is basically bank’s money which you are using and you have to pay it back to bank. Bank charges, is a complex Topic and is explained in details in this Column “How credit card charges works?
Credit cards come with “credit limit” which banks set after looking at different factors including your bank history. So you can spend money up to this limit. Banks normally give interest free period, so if you pay within that specified time you will not be charge any fee at all. Bank interest varies from client to client and bank to bank.
You should be careful when applying for credit card because it sometimes leave you with lots of interest and other charges, do proper research on which card is best and understand their fee and other charges. Banks also issue cards with long interest free period known as “Balance Transfer card” and “Money transfer card” so it lets you transfer money from your credit card to your bank account with nominal fee and normally no interest for up to 4 years.
You can read more about “Balance transfer Card” and “Money Transfer card” here.
Many people think credit card is too bad as banks charge hidden fee and ridiculously high interest rates which is not understandable for customers. However truth is that Banks never charge hidden fee and any fee which is not in mentioned in contract. Banks are regulated by local and international institutions and laws which they must follow, so if they charge anything such fee they will definitely be facing lots of penalties. There is another danger as well these days of customer reviews which almost all banks are very much concerned about. Because of very much competition and many banks offering same services to customers, banks are always worried about losing customers so they never charge such fee.
It is customer’s duty to understand the charges and read the terms and conditions carefully because accepting any offers from bank. This applies to all the services provided by banks and not only Credit cards. It is always better idea to consult a Financial adviser before applying for any banking service. Especially in the case when you are thinking about repaying a loan or credit card balance.