Credit/Debit card

To access the money in your bank account you can use one of 2 types of cards: credit or debit cards.

A credit/debit card is a plastic card which provides an alternative payment method to cash when you make a purchase.

A credit card is a card which entitles its holder to buy goods and services based on a line of credit from which the user can borrow money. The credit card holder promises to pay that credit later, within a predefined time interval.

A debit card is similar to a credit card, except it pulls money directly from your bank account. Debit cards do not create or increase a loan like credit cards do. Debit cards can also be called an electronic check, as the cash is directly withdrawn from your bank account.

Credit/debit cards can be used in almost any retailers. You just swipe it and you're done. You can also use them in the internet. For this, you can use a virtual-credit-card, which is very easy to generate, and allows you to make safe transactions over the internet.

Choosing to use credit or debit determines how your purchase is processed. It influences who pays the bill for that processing, how long it takes, and what are your rights.

When you use a credit card, you usually sign a charge slip. When you used a debit card, you usually use your PIN. In both credit/debit cards, you can choose either to use a PIN or tp sign a charge slip. The main difference is if you are doing an online or an offline transaction:

• If you introduce your PIN, it’s an online transaction – it gets completed electronically and it’s done pretty quickly.
• If you don’t use your PIN and you sign a charge slip instead, it’s an offline transaction.

So, when you use a debit card, you can sometimes choose to have your purchase processed as a "debit" or "credit" transaction, but you’ll be always getting the money directly from your bank account. Even though it is a debit card, offline transactions are very much like credit card transactions. Your debit card might have a Visa logo on it, or a MasterCard, for example, so it runs through the Visa or MasterCard network, respectively. It’s not a credit transaction, but it uses the same infrastructure.

When you use a credit card, you’ll be always using money from your credit line. You can either choose to sign a slip or to introduce a PIN. However, you are always making a credit transaction.

When you buy goods with your credit/debit card, you should let the retailer know which type you’re using and, if you’re using a debit card, also inform if you are using an online or an offline transaction.

When you do an offline transaction and simply sign a charge slip, the retailer has to pay a small percentage of your total purchase – let’s say 2%. This fee goes to the bank that issued your debit (or credit) card as an interchange fee.

With online transactions, retailers pay a much lower percentage. They might only pay 10 cents or so per transaction.

For people who have bad credit, debit cards are very useful because you don't have to carry cash around with you. Debit cards pull money directly from your bank, for which it is enough that you have some money in your bank account, even if your credit has some blemishes.

Debit cards are a good beginning for children to understand how credit cards work. They start learning how to use them, but there is a limit that you manage, and allows you to control how much money your kid spends.