Today it is very common for us to make acquisitions with our cards when paying for services such as: electricity, water, land, etc., entrtment: movies, restaurants, museums, among others, but when the days of payment arrive at your work (for the debit cards) or the days of payment (from your debit card) you feel as if your soul emptied little by little, for this reason, do you know what is the payment method that suits you best according to your situation? some notable differences that you must know before taking the plastic and these are the main ones:
- Debit card: when making a purchase you must enter your security PIN and automatically withdraw the amount of the service or product from your bank account, in case of not having funds the bank has the option to pay the charge and enter it with insufficient funds rate, or to reject the charge. For businesses, this type of transaction is the closest thing to the cash you can get without using bills and coins, and offers you more transaction fees than credit cards.
- Credit card: the transaction requires a signature, and is processed by the credit card company, the amount of the transaction may or may not be withdrawn immediately from your bank account, depending on how the merchant handles your transactions. Some stores maintain your credit transactions and send them at the end of the day. Depending on the bank, using credit instead of debit can offer some protection against the fraud offered by credit cards (more on this a little later). However, this is not universal, so you should check with your bank to be sure. Finally, for the merchant, processing a transaction as a credit usually involves a credit card transaction fee for the major issuers, such as Visa and MasterCard, it should be mentioned that this may cause higher fees or minimum purchase requirements to use your credit card.
For small businesses, you can use your card as a debit card instead of credit, so you do not have to pay with that credit processing fee. At the same time, however, signing your purchase as a credit can give you some protection against fraud and delay collection to your account, depending on the bank. Some banks indicate that "online" debit transactions and deducts them immediately, while credit transactions are "offline" and offer protection by Visa before they are processed.
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There are advantages and disadvantages for each one, and now that you know the difference when it comes to paying, let's talk about when you should use credit cards and when to use debit:
When credit is the best option
- When shopping online. The credit cards are the safest when buying online since they have protection against fraudulent charges. If you detect a fraud yourself, you can stop the charge and invest it quickly thanks to the "zero responsibility" policies of credit card issuers.
- When making large purchases or purchases of electronic products. These have various purchase protections or insurance or even guarantees to ensure the operation of good while it is finished paying.
- When traveling or vacationing. If you are away from home, the additional fraud protection offered by credit cards can be essential if someone steals your card number or accidentally uses an ATM with a tourist trap designed to collect data from the card. With a credit card, you can stop it without being responsible for the charges, there are other discounts such as in rental cars, frequent miles / miles of travel or cash refunds on purchases.
When debit is the best option
- When making payments immediately. The debit works instantaneously since it serves as digital money.
- By knowing your expenses and adjust your budget. The automation of your finances is that you can take with you a debit card specifically for your personal or luxury purchases. You can use it as much as you want, as long as you are within your budget, and if you leave your budget: the card will no longer work. The positive side: you will not incur charges, and you will not pay interest for those drinks at the bar on Friday night, which in general will keep you under better financial health.
- If you are dealing with your finances carefully, or recovering from bad money management habits. Credit cards are not for everyone. They are a tool, a powerful tool, but like any tool, they are good for some people and bad for others. If you have difficulty managing your money or living within your means, it is best to leave the credit card in your home completely and find a bank that offers a zero liability policy in your debit account, so you are protected from transactions fraudulent In this way, you can budget, spend only what you have, and still be protected in case someone steals your card number and PIN.
- If you want the best exchange rate in foreign currency. Credit cards may be better for certain transactions abroad, but if you need real money in a country that is not yours, your best option is to use your debit card and withdraw money from an ATM.
There are several arguments to decide on one or the other, the credit can be a much more powerful and flexible option than the debit. Some of its benefits are protection against identity theft, your purchases can be protected against defects and possible failures, and disputes are handled quickly without having to pay just to recover your money.
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While credit cards are still credit, and you are indebted for the purchases you make. You are paying interest, and the fact that you can not manage your credit wisely can generate serious financial problems. Sometimes it may be better not to spend anything unless you have the money to do it, so it will not generate payment stress if you did not have the resources at first.
In any case, choose the option that works best for you in the situations we have described. Think carefully about how you manage your money and how well (or badly) you are able to handle the credit. The answer you get may not be the same as for someone else, but at least you will know what you have to do.