Credit and debit card: what are the similarities and differences?On February 23, 2020 by admin
Known under the concept of plastic money, the credit and debit card is a feature of today’s world economy. More and more people have one of these instruments to pay in commerce, whether in Chile or abroad, or in person or for products purchased through the Internet.
According to data from the 2016 Financial Inclusion Report in Chile of the Superintendency of Banks and Financial Institutions (SBIF), 72% of people over 15 years old have a debit card, while 34% have a bank credit card. For this reason, given the important and growing presence of this financial instrument, at Compara we indicate the similarities and differences that both products have, and we invite you to simulate which one currently suits you best and meets your needs and expectations.
Credit and debit card similarities
These two tools are linked to banks, commercial houses and / or credit unions. It is this type of institutions that, under a regulatory framework of the SBIF and in possible alliance with other financial companies (Visa or Mastercard for example), are the ones that can issue payment cards.
Among the main characteristics is that both correspond to physical, electronic or computer devices that:
- They have a unique identification system (usually a serial number).
- They contain personal information to carry out the transaction in authorized systems (payment machines, ATMs and / or virtual transfer platforms).
- They present security mechanisms to develop payments: passwords, confirmation system, signature validation, among others.
The increase and diversification of the credit and debit card, in this sense, is based on the massive access to digital platforms and the multiple options for purchasing goods and services.
This also has an impact on the fact that payment systems are generating advances and innovations in the financial industry itself
For example, the classic card (and hence its name) refers to a piece of plastic the size of a Chilean identity card that has an information storage system that can be a magnetic stripe or, as it has been introduced. lately, the chip . It is this information storage technology that allows the connection “in real time” with the bank or institution that issues the card, and that generates the payment permits according to the contracted credit plans or the funds available to make the transaction.
But today it is not only a piece of plastic that replaces cash and “chauchas” (coins), but also the credit and debit card can be virtual, which is a resource that some banking institutions are taking to avoid fraud and violations to which users are exposed when buying online and entering their bank details to the always hackable Internet. And even, a payment system is already being implemented using the cell phone as a card.
Where will we go with these advances
But, beyond the innovations, some common points that payment cards should consider (expressed by a 2017 SBIF circular) are:
- Information on public service offices and on the websites of the respective issuing institutions, clarifying concepts, characteristics and conditions of use and collection.
- Information on transactions, balances and collection of commissions, including details of the beneficiary of each payment.
- At least, information that allows knowing the brand, the name of the issuer, its coded numbering, and the name of its owner or the person authorized to use it (unless there is a product called “payment card with unnamed fund provision”). , better known as “prepaid card”).
In addition, they have other elements in common that are linked to operational and security safeguards by the issuing entity, which help protect the information contained through authentication and fraud prevention mechanisms. If any problem occurs, the bank must facilitate blocking the card.
Differences between credit and debit card
The differences between the credit and debit card are several, but they can be summed up in the ability to get into debt with other people’s money or not.
In this sense, credit cards have some characteristics such as:
- It is based on a financial credit from the issuing entity, on a loan “immediately” that can be paid in a single future transaction or in a series of installments, to which commissions and interest are added.
- It is given to those who undergo a commercial evaluation and meet the minimum income requirements demanded by the facilitating entity.
- There are different amounts or quotas that are related to the declared income and the consequent ability to pay, as defined in the client’s commercial evaluation.
- In addition to the basic information it must contain and described above, you must mention the card’s expiration date and the cardholder’s name (sometimes with the signature). Credit cards are not transferable.
- They are widely used for trips abroad, since many of them have quotas in dollars.
- Cash can be drawn, although it must always be taken into account that the additional values for each use of an ATM or ATM can be very high.
Meanwhile, the debit card is defined as the most widespread payment instrument among Chileans who have cards. This was strongly increased with the creation of the BancoEstado Rut Account, which has been in distribution since 2007 and which has allowed the acquisition of a transactional product with universal access. Currently, when all types of debit cards are added together, the SBIF estimates that there are more than 17 million units.
Among the features of the debit card are
- Its use is conditioned to the funds that the holder has in the linked account (at sight or current). If there are not enough funds, you cannot draw or pay for the requested amount.
- At the time of the transaction, the amount used is automatically subtracted from the account of who is paying.
- They are used to withdraw money from any ATM associated with the financial institution, and the charge for this transfer is much less than the interest charged when the card is credit for the same action performed.
Although the differences between the credit and debit card are almost evident, both must have all the necessary safeguards on the part of whoever uses them. In this sense, the National Consumer Service (SERNAC) has carried out multiple campaigns aimed at increasing knowledge about the measures to be taken and the rights we have as consumers of financial products. We hope this information has been helpful. If you want to have more details of card options you can use our comparator, and thus make more informed and intelligent financial decisions.
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