The Difference Between A Kredittkort And A Debit Card

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A lot of people think that a credit card and a debit card are the same things. Both of them look identical since they have magnetic strips, EMV chips, expiry dates, and a lot of numbers on them. You can use both of them in shops, both in brick-and-mortar stores, as well as online.

On the outside, both of these products look completely identical. However, there is one distinction that sets them apart. That’s the place where the money comes from. With a debit card, you can only take out as much money as you already have in your bank account.

On the other hand, a credit card allows you to go overboard. You can borrow more from the lender, but then you need to pay it off with interest. That’s where the dragon lies. If you don’t know how to handle debt and loans, it would be much better to stick to a debit option since that can’t make you go bankrupt.

Moving on, you probably have used both of these cards interchangeably. There’s at least one credit and one debit card in your wallet. Since they’re simple and secure to use, they can’t be surpassed by another option. Cryptocurrencies plan to change that, but it’s still a long way before they do so. Here are some tips that might help you figure out which card to utilize based on specific requirements. 

What are the main differences?

 

 

Debit Card

As we mentioned above, credit cards allow you to borrow money from a financial organization. This could be a bank, a union, or any other place where you can get one. That’s why it’s not smart to create these types of cards in every store you visit. The deals seem lucrative since you’re getting a discount, but that’s a marketing trick.

You’re paying more for maintenance fees than you can ever get in discounts. Now, when you go over your limit, that’s when the real trouble begins. Instead of just repaying the set amount, you also need to pay extra interest-based on the rules you agreed to when you signed the terms.

The worst thing is that the interest rates are extremely high. They can range anywhere between 12 and 20 percent. That’s a super high number down the line. In some cases, it might be smart to opt for rewards programs since you can get travel points or cash back.

These two rewards are amazing since you can get more for the money that you’re already spending. You can go to Kredittkortinfo.no/ to find out more.  If you get 2 to 5 percent back every time you go shopping, that money could be used for investing purposes.

Airport services have great deals that give you the option to add a mile to your travels for every dollar spent. In some cases, you might even get two or three miles for every dollar you spend using your card. The miles add up fast, and you could visit the Bahamas in a year or two completely for free. The process is quite simple, and you need to know the rules before you apply. 

What are the advantages?

Debit Card

There are a couple of advantages when it comes to creating a good credit history. First of all, everything you do gets reported. This influences your credit score. Based on the type of person you are, this could either be a good thing or a bad thing.

If you pay all of your bills on time, then your score will keep going up. In the future, when the bank does a background check on you, they’re going to see that you’re a responsible member of society. As a reward for being on time with your payments, they’re going to offer you better deals, lower interest rates, and better loans.

As long as you abide by the limitations, you’ll be getting benefits. Plus, banks and other lending institutions give you a free chance to take a look at all the metrics they’re taking into consideration. This will give you the chance to see how you progress over the years.

Another advantage is fraud protection. Compared to debit, it’s like a night and day difference. On the off chance that your card gets stolen, the most that can be missing from your account is 50 dollars. If that happened to your debit, then it’s another story.

You would have the same protection if you reported it in the first two days. If 48 hours pass and you don’t report it stolen, then the limit gets increased to 500 dollars. Finally, after two months, the card becomes limitless, and the thief can max it out completely. As an additional benefit, you can challenge unlawful transactions and get your money back if you make a mistake. In the case of debit, that can only be possible if a retailer agrees. 

Are there any drawbacks?

For every advantage, there’s a disadvantage. If you’re the type of person that’s always late with payments, then your score is going to decrease. This will create consequences down the road. In order to avoid this, it’s best to set up notifications on your phone that will remind you when due dates are closing in.

This will help you make timely payments, and you will also avoid exceeding the limit. Additionally, there’s the possibility of incurring debt due to excessive spending. When you go to the store, you don’t check your balance.

You just give your card and hope for the best. In the case of a credit card, you’re not spending your own money. You’re spending the money of the bank. The bad thing here is that banks have an unlimited amount of money since they’re the ones creating it.

They’re going to give you as much as you ask for, but for a cost. The cost is going to come in the form of interest, which can ruin your financial portfolio in a heartbeat. That’s why you should never have large balances on too many cards. That’s going to disorient you, and it’s going to be tough to keep up with everything. 

Is debit better?

Since this option can only use as much money as the user has, it completely removes the risk of debt. Here’s something that isn’t widely known. Retailers are aware that consumers that use digital payment services always spend more.

That’s why they lure you in by selective product placement to make you want to binge. If you see a piece of clothing that’s 80 percent off, you’re going to want to have it since it seems like a great deal. A couple of those items are going to make you overspend, even though you didn’t have that intention.

Plus, over the past couple of months, Visa and Mastercard have improved their services when it comes to anti-fraud measures. They’re now providing the same safeguards as their other products. Even though that’s in place, it’s best to report the theft as soon as it happens because if you wait too long, it might not be their responsibility.

If you wait for more than two months before you file a report, then you will be eligible for all of your losses. The final benefit that sets them apart is that there is no yearly charge. You can use it as much as you want without having to worry about fees when it comes to transactions. The only drawback in this scenario is that there are no rewards programs, but that might change in the future. 

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