What is a credit card? How to distinguish a credit card from a debit card

Credit cards are increasingly being used and widely used because of the convenience as well as incentives that the card brings to users. So do you really understand the functions, features or differences between credit and debit cards? Let’s find out with Tnhelearning.edu.vn through the article below.

What is a credit card?

What is a credit card?

Credit card (also known as Credit Card) was issued in 1951. This is a “spend first, pay later” card, which customers can spend without having money on hand and at the end of the period. must pay the full amount spent to the Bank.

Credit cards are used to make payments at places that accept cards such as supermarkets, e-commerce sites, etc., for the purpose of replacing cash payments. Currently, there are two types of popular credit cards: domestic credit cards and international credit cards.

Functions and features of credit cards

Functions of a credit card

Functions of a credit card

Deferred payment function: You can spend money in advance such as shopping, paying bills, buying airline tickets, booking rooms, … without having to have a balance in the card. You will have a full repayment period of about 45 days with no interest applied. After the above period, the bank will charge a deferred interest rate equal to the current lending rate of the Bank.

Cash withdrawal function: With a credit card, you can withdraw cash to meet your spending needs like a debit card. However, you should limit it because the withdrawal fees and interest rates applied by banks are quite high. The average fee is 2 – 4% of the withdrawal amount.

Installment: At some stores, e-commerce sites have accepted credit card installment payments with attractive interest rates, possibly 0%. This function helps you to own your favorite item without financial pressure

Credit card features

Credit card features

When paying by credit card, the bank will advance and allow the cardholder to spend within a certain limit, or card limit, without having to have a balance on the card. The limit will depend on many factors of the cardholder, such as income, collateral. When the payment is due, you need to repay the full amount you have spent as agreed by the bank.

Differentiate between credit and debit cards

Differentiate between credit and debit cards

Debit card

• Definition: As a payment card, used to replace cash. Customers can only use according to the balance deposited in the card.

• Card structure: The front has the words “DEBIT” above or below the card issuer. Logos of Banks and affiliated organizations (Visa, MasterCard). Information about the cardholder’s name, card number, card issue date and validity period. The back has a magnetic stripe containing the card’s encryption and safety information.
• Functions: Cash withdrawal, money transfer, payment, phone card top-up, …
• Conditions for making a card: Just basic documents such as identity card/citizen identification
• Spending level: Customers can use less than or equal to the amount deposited into the account
• Credit history: Does not affect the process of opening and using the card.
• Fees and interest rates: Most debit card fees (withdrawal, transfer, annual fees) are lower than credit cards. Depending on the bank, there will be Internet Banking fees or not. However, international debit cards will have higher fees than domestic debit cards.

Credit

• Definition: As a payment card, used according to the feature of “use first, pay later”. Customers are allowed to spend the amount equal to the card limit and must refund the full amount after 45 days.
• Card structure: The front has the words “CREDIT” on the card (some banks will not have this inscription) and the electronic chip Logo of the Bank and its affiliated organizations (Visa, MasterCard). Information about the cardholder, card number, issue date and validity period of the card. The back has a magnetic stripe containing the CVV/CVC security number and a signature box for the cardholder.
• Function: Shopping for goods, spending on services instead of cash. Installment with attractive interest rate 0 – 1%
• Conditions for making a card: Cardholder must have sufficient proof of income source, salary statement, labor contract, …
• Spending level: Customers can use the amount equal to the limit provided by the bank without having to have money in the card.
• Credit history: Credit card fees (withdrawal fees, annual fees) are often very high. For credit cards, Internet Banking fees are usually free. Customers have to bear high interest rates like lending rates if payment is late.

Here is the basic information about credit cards. Tnhelearning.edu.vn hopes you can better understand and use this card properly.

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