6. DEBIT CARD & CREDIT CARD
DEBIT CARD :
A debit card is linked directly to a person's bank account. When a transaction is made using a debit card, the funds are immediately deducted from the associated bank account. Key features of debit cards include :1. Access to personal funds :
Debit cards allow individuals to access the funds available in their bank accounts for purchases, withdrawals, or online transactions.
2. Spending limit :
The spending limit on a debit card is typically
determined by the available balance in the linked bank account. It does not
involve borrowing money from a financial institution.
3. No interest charges :
Since the funds used in debit card transactions
come directly from the linked bank account, there are no interest charges
associated with using a debit card.
4. ATM withdrawals :
Debit cards often allow users to withdraw cash
from ATMs, enabling convenient access to funds.
CREDIT CARD :
1. Credit facility :
Credit cards
provide a revolving credit facility, allowing users to borrow money from the
financial institution issuing the card to make purchases or pay bills
2. Billing cycle and payment :
Credit card transactions accumulate on a
monthly billing cycle, and users receive a statement with details of their
transactions. They have the option to pay the full amount due or a minimum
payment by the payment due date. Unpaid balances accrue interest charges.
3. Interest charges :
If the full amount is not paid by the due date,
the remaining balance incurs interest charges. The interest rate associated
with credit cards is often higher than other types of loans.
4. Credit history :
Responsible usage of credit cards can help
build a positive credit history, which can be beneficial for future borrowing
needs.
5. Rewards and benefits :
Many credit cards offer rewards programs, such
as cash back, travel miles, or loyalty points, which can be earned on eligible
purchases.
Debit cards enable
transactions using the individual's own funds, whereas credit cards involve
borrowing money from the issuing institution with the obligation to repay it
later, potentially with interest charges
