Credit Cards and Debit Cards: what is the difference ?
The difference between a Credit card and a Debit card is that the Credit card is a postpaid
system meaning that the bank lets you spend money on credit, while the debit card is a
prepaid system meaning that there must be money on the card or on the account attached to
it before you can use it.
A Credit card must be approved by the credit provider, the bank, before the
cardholder can use it to pay with at merchants who accept this card. Most cards have a
maximum amount of credit to be used by the holder.
When you make a purchase you will be asked to sign a receipt with the record of the card
details and the amount to be paid. If the card has a chip you can be asked to enter the PIN
number ( personal identification number). Many merchants also accept authorisation through
the telephone or an internet approval called a CNP transaction ( Card/Cardholder Not Present)
This electronic verification system allows merchants to check if the card is valid and the
cardholder has sufficient credit to cover the payment in seconds.
For the verification a terminal or POS system (Point of Sale) is used and the data on the
magnetic stripe or the chip is read for this purpose.
The cardholder receives a monthly statement with the purchases made and the total amount
to be paid. If the card user pays a minimum portion of the outstanding debt interest is charged
which is very often of a higher rate than a standard loan interest.
Debit Cards are also called Check Cards or Bank Cards. It is called an electronic Check Card,
because the funds are withdrawn directly from either the bank account, or
from the remaining balance on the card. For payments over the internet no physical cards are
issued. To withdraw cash from an ATM machine Debit cards can also be used.
There are 3 types of payments with a Debit Card: 1 The PIN debit or online debit ,
2 the signature debit or offline debit and 3 the Electronic Purse Card payment.
Although the majority of the debit cards are of the Visa or MasterCard brand, there are many
other types of debit card which are only accepted within a particular country or region:
Switch (now: Maestro) and Solo in the United Kingdom, Interac in Canada,
Carte Bleue in France, Laser in Ireland, “EC electronic cash” (formerly Eurocheque) in
Germany and EFTPOS cards in Australia and New Zealand. The need for cross-border
compatibility and the advent of the euro recently led to many of these card networks
being re-branded with the internationally recognised Maestro logo, which is
part of the MasterCard brand. Some debit cards are dual branded with the logo of the
(former) national card as well as Maestro (e.g. EC cards in Germany, Laser cards in
Ireland, Switch and Solo in the UK, Pinpas cards in the Netherlands, Bancontact cards
in Belgium, etc.).