Genome’s team is back with yet another article that dives into different types of fraudulent financial situations that people and businesses can face. And this time, card-not-present fraud is on the agenda. Want to know how to avoid scams associated with card-not-present transactions? We gathered some tips below. What is a card-not-present transaction? Before we get to the fraud part, let us first explain what card-not-present transactions are in general. Card-not-present transactions (also known as CNP transactions) are the type of payments a person makes with their debit or credit card. Such payments happen remotely, meaning that the card and
In a world where most cards look all the same and are mostly used virtually via digital wallets, being able to differentiate between credit and debit bank cards is a money-saving skill. Today we will talk not about how these cards look. Indeed, we will get deeper into their functionality and features, along with all the fees and charges.
Genome offers physical and virtual debit cards to its users both on personal and business accounts. We are well aware of what features are the most requested ones, where people tend to spend the most, and, finally, at what occasions it’s best to use a debit card and when a credit one. Read on to find out all the differences and similarities between these two cards.
What is a credit card?
It’s a bank card that allows you to “borrow” money from the issuer to make purchases. It has no limitations when it comes to the types of payments allowed. Credit cards can be used online, in physical shops, and with digital wallets such as Apple or Google Pay. Moreover, you can even make transfers with them using services like PayPal.
So, what’s so special about a credit bank card? The answer is hidden in its name. The funds withdrawn from your credit card are taken from a line of credit from your provider rather than a current account. This amount needs to be returned by the end of the month (sometimes up to 56 days). Otherwise, a pretty high interest will be applied.
Sometimes, you may come across a better credit card company with lower interest rates. In such a case, you can make a balance transfer or, in other words, move funds between credit bank cards. This solution can save some money no matter whether you’re planning to use a card for a few months only or longer. There’s also a possibility to make a money transfer – wire funds to a bank account. This option can be quite costly, but it still works in emergencies.
Pros of using credit cards
Even though it seems illogical to take a cash advance for each purchase, plenty of people prefer paying with these bank cards because of the following benefits:
- First of all, a credit card influences one’s credit history. If credit is always returned in time and the provider has no issues with a client, it shows that a person is responsible and has a stable income. In fact, this bank card is a great way to improve your credit history if needed.
- Secondly, a credit card provides immediate access to some extra funds. Imagine that you want to make a large purchase, like some expensive device or property but you cannot afford it at the moment. No friends or relatives can borrow the necessary sum. Once you receive a credit bank card – the problem is solved and you have enough money to buy whatever you need within the agreed limit. In other words, buy now – pay later.
- Thirdly, a credit card can be used just like any other bank card. It works in all stores (both online and physical ones), as well as in ATMs. What’s more, some hotels or car rental services accept no other cards. Physically, credit bank cards are no different from debit or even prepaid cards – they have the owner’s name, account number, CVV engraved on either front or backside. You can also track your spendings in a mobile application, just like with a debit card.
- Fourthly, credit bank cards have improved fraud protection. The most important rule here is to notify the issuer as soon as possible after the card got lost/stolen or you’ve noticed some fraudulent activity.
- Finally, many credit card companies offer rewards for using their products. These can be cashback, points, miles, discounts with big retailer networks, etc.
Cons of using credit cards
Some disadvantages are worth your consideration:
- Just like building up a credit score, a credit bank card can easily do wrong here. If you fail to pay up the loan + interest, it can definitely disrupt your credit history. What’s more, it’ll serve as proof that one is not a reliable borrower.
- Once you have access to extra money it’s easy to spend way much more than it’s actually needed. It’s best to be careful when using a credit card not to go into debt you won’t be able to return.
- If you fail to pay back your credit amount the same month, you will also need to cover a huge interest.
- ATM withdrawals are costly because of additional charges from credit card companies.
What is a debit card?
It’s a bank card linked directly to one’s current (checking) account. It can be also used while shopping online, as well as in physical stores with the help of POS terminals. The same goes for making purchases with a debit bank card via digital wallets and various smart devices, like smartwatches.
The funds are taken from your current account as soon as you pay. It means that there are almost no chances to return the money in case there was a mistake with the transaction. During the past few years, virtual debit cards are rising in popularity. They are quite convenient – you don’t have to worry about losing or forgetting a physical card or a wallet somewhere. Virtual card, in its turn, is always in your pocket on the smartphone.
Pros of using debit cards
The benefits are plenty, especially while talking about daily spendings:
- There are no fees at all or they are minimal. No matter if you’re withdrawing cash in an ATM or making an online transaction – these financial operations are free of charge.
- When using a debit bank card, you’re paying with your own money from a current account. There’s no need to go into debt to purchase something.
- Debit card payments are accepted by almost all merchants worldwide.
- They provide extra security because of PIN (Personal Identification Number). For instance, nobody can take cash in the ATM without this code.
- No interest imposed. This can only happen if you use the credit line (this feature is available with some banks even with debit cards).
Cons of using debit cards
To tell the truth, debit bank cards don’t have many flaws because they are regular and the most common bank cards.
- No impact on one’s credit history.
- If you go overdraft, the fees will likely be there.
- Your spending limit is the balance in your current account. In most cases, you cannot borrow any money from a card issuer.
- Some rental services and hotels accept only credit card payments.
- Limited fraud protection compared to credit bank cards.
Debit and credit cards are pretty similar in use. They are approved by most merchants all over the world, allow you to make a purchase right away, and even look almost the same. To understand the differences between these two bank cards, we’ve prepared a short table:
|Debit card||Credit card|
|Helps to build up a credit score||–||+|
|Is linked to a current account||+||–|
|Is linked to a credit line||–||+|
|Interest||Only if you go overdraft||+|
|ATM withdrawals||Free||Not free|
When to use a credit card vs. debit card
These two work similarly when it comes to their usage. The key difference here lies in fees and charges. As for everything else – card payments (both online and via various POS terminals, and ATM withdrawals) – there’s no difference which bank card you will choose.
But is there any guide on when and where it’s best to pay with a credit card rather than a debit one and vice versa? Yes, and you can find it just below.
When to use a debit card
Feel free to withdraw money from ATMs with this bank card as often as you need it. Unlike credit cards, you don’t have to cover any additional charges for cash withdrawals with debit ones. One more piece of advice here is to use ATMs by your bank or financial provider to avoid any extra fees.
Of course, debit cards can be used for both online and in-store purchases as well. If you know that you are likely to overspend your budget, it’s better to pay with a debit card – it won’t allow you to go overdraft in most cases.
When to use a credit card
These bank cards are recommended for big spendings because you can always claim your money back just in case. Some rental services and hotels only accept credit cards, so that leaves you with no other payment options.
If you need to raise your credit score, using a credit card is probably the simplest way to do this. Under the condition that you clear up an overdraft every month, you can boost a credit score easily. A debit bank card will not help here, because it’s not included in your credit history.
Choosing the best card for your needs
We’ve been talking a lot about debit and credit cards in this article. Both of them are reliable for making any payments and work with most merchants all over the world. Moreover, these two types of cards are used in the same way: for online shopping, you need to enter card details or add it into a digital wallet. For in-store purchases, you can go for contactless payments (the most common ones), chip and PIN transactions (for debit bank cards only), or use a magnetic stripe on your card.
However, debit and credit cards also have some serious differences. That’s why, depending on your needs, it’s better to choose one of them in specific situations. To put it shortly, a debit bank card is intended for daily spendings and cash withdrawals (because of low fees in ATMs). Here the funds are taken immediately from your current bank account, so the only limit is your balance. In addition, it’s much easier to track all the transactions in a mobile app or by checking the amount left in the ATM (usually for free). Some debit card providers also offer an overdraft facility (just like with credit cards) for their clients, but this is pretty rare.
Need a debit card? Order one with Genome – we issue these for our multi-currency personal and business accounts. Don’t want to carry a plastic card all the time? We also have virtual ones that can be used via digital wallets or for online payments. Click for pre-order here.
Credit bank cards are handy if you want to improve your credit history. If you can pay out any debt on this card by the end of the month, it’ll have a beneficial impact on your credit score. If you don’t have enough money to buy something at a big price right now, you can use a credit bank card and return the funds within a month. If you’re often staying in hotels, you might also consider a credit card over a debit one because most such facilities will only process credit card transactions.
What’s the difference between a debit card and a credit card?
The one distinguishing thing that makes these two cards different is where the money is taken from every time a payment is made. In the case of debit bank cards, it’s an owner’s current account. The funds leave the account shortly after purchase.
With a credit card, this process is a bit more complicated. To have and use a credit bank card, you need to sign an agreement with the provider. With the card, you can take cash advances. Thus, you will be using money from an overdraft facility. Each time you make a payment – you will be borrowing from a bank. There’s no need to worry about extreme interest rates or the ever-increasing debt – if you repay the necessary sum each month, you can avoid all these complications effortlessly.
When it comes to looks, credit and debit cards are alike: they have the required codes, chips, and magnetic stripes (if any), and, of course, your name and last name printed on them. It’s not so easy to differentiate these bank cards just by looking at them.
Which is better, a credit card or debit card?
Now, let’s get into details. Without a doubt, each bank card has its pros and cons. Nevertheless, it’s impossible to say that a debit card is better than a credit one or vice versa. The thing is that these bank cards were made to be used in different situations and satisfy the needs of their owners.
A debit card is considered to be a basic one and the most commonly used bank card. It was designed for daily spendings and, as a result, has better tracking features and lower fees. For instance, you can check the balance of your debit card with the help of mobile banking, as well as in ATMs. Cash withdrawals are also free of charge.
Why use a credit card over a debit card?
While talking about a credit bank card, one should remember that it’s of great importance for your credit history. These cards are quite practical if you need your credit score improved. If you’re returning the money used on a credit card in time, it will raise your credit score. At the same time, being late with these payments and having to do with high interests can have the opposite effect.
Some facilities like hotels and car rental companies require only credit bank cards when paying for their services. It’s also worth mentioning here that these cards have better fraud protection compared to debit ones. No wonder that they are recommended for large purchases so that you can claim the money back if something goes wrong.
Finally, a credit bank card is a great solution for people who cannot save up big amounts but would rather pay in small parts.
Can I use a credit card as a debit card?
These two cards function more or less the same for both in-store and online payments with the majority of merchants. That is why it does not matter much whether you’re paying with a credit or debit bank card. Moreover, if you’re using physical cards, you will see no difference during the payment process. Neither of them requires any extra actions to be completed to make a transaction. The only exception is that with a debit bank card, you may need to provide a PIN code sometimes.
Nevertheless, you cannot use a credit card as a debit one. The first one draws money from the overdraft facility provided by your issuer. The second one is linked directly to your current account. With a credit bank card, you need to pay out the sum you borrowed each month. Otherwise – the interest will be applied.