A debit card is a card directly linked to a personal account that the customer has in the bank. All card transactions, whether cash withdrawals at an ATM or cashless payments are immediately charged to the account balance. In short, we can spend this card as much as we have on our account.
The credit card is not directly linked to a personal account
It has its own separate credit limit, under which you can use cashless payments and withdrawals from ATMs. This limit is used within a certain cycle, it is a monthly cycle, known as the billing cycle. Usually, such a cycle lasts from 1 to the last day of the month but may include other dates.
After the end of the month, the bank generates a statement covering all transactions made at that time and specifies when the sum of transactions can be repaid by the customer.
Most often this takes place within 20 days of the end of the month. Hence, the banks adopted the 50-day interest-free credit card period – if we make a purchase on the first day of the cycle, we can repay it after 50 days.
Cashless payments by credit card
And repayment of the entire transaction within the time limit required by the bank means that we can use free money. However, you must be careful not to repay the entire debt as well as not to use credit cards in the form of cash withdrawals from an ATM.
Such transactions are subject to high commissions on the amount paid, and for this type of transaction, the bank immediately accrues interest from the date of payment.
Repayment of the entire debt, i.e. all transactions made with the card on a monthly basis, after the billing period is only one of the available options. The bank usually offers several options – you can pay off all or part of the debt, with a minimum of 5% of the debt.
When applying for a credit card
We set this limit and it is best to set one that you can easily repay after the billing cycle. A credit card is a type of credit or debt that we incur. When using it, we do not use our own money, but the credit limit that is granted as part of the card. So you have to approach this wisely.
A credit card is useful when traveling abroad, booking tickets or hotels online. Many cards come with insurance packages that increase the security of purchases. Some points only accept credit cards. However, more and more debit cards also have this functionality, which is why credit card popularity is steadily decreasing.
The lack of ability to use cards by customers, setting too high limits and paying off minimum amounts meant that cards were perceived as one of the most expensive loans on the market as well as debt, with minimal payments it was difficult to get rid of.