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|March 7, 2000||
Credit, Charge or Debit?Larissa Fernand
Credit card: This piece of plastic enables you to make purchases and payments and pay for them at a later date. Within the credit card category you can opt for either Classic, Executive or Gold. The only difference being the benefits extended to each category. The more premium the card, the higher the amount of credit sanctioned with more benefits (such as higher insurance cover, accessibility to airport lounges, travel discounts and arrangements, free global calling card). Some banks may even offer a lower interest rate on revolving credit. And what's the catch? A higher joining fee, annual fee as well as income requirement.
Charge card: Credit cards with no pre-defined spending limit. If on a regular credit card your credit line is Rs 30,000 a month, you cannot exceed this limit since no payment will be made by the bank over and above this amount, unless you call and request a temporary higher limit. On a charge card, no such hassles. With no limit to your spending, your only obligation is to clear the entire amount that appears in your billing statement. With no option to revolve credit, be careful of how much you spend or it could wipe you out.
Debit card: Basically, no free credit line. A credit card requires the bank to make a payment to the merchant establishment and the cardholder has to settle the bill later. Not so in the case of a debit card. Here, the value of the transaction is deducted immediately from his/her bank account. The moment the card is swiped at a merchant's debit terminal, an electronic message is sent to the bank where a check is made to see if the customer has sufficient funds in his account. Once that is confirmed, the amount of sale is debited from the customer's account and credited to the merchant's account simultaneously. Unlike a credit or charge card, with a debit card you are required to have an account with the bank issuing the card.
Since the card allows you to have direct access to your account, you have no credit limit. You can spend till all the money in your account is wiped out. Either this will wipe you out or it will keep you in check. Neither do you have to bother about settling monthly bills. And, best of all, you will never end up in debt. If you don't have the money, the transaction won't be cleared.
And, if somebody pinches your card and is aware of your PIN- personal identification number (highly improbably), you could end up in the bread line.
So what fits you?
You: A substantial bank balance.
You: Investments parked in various instruments with a low bank balance.
You: An impulsive buyer.
You: No bank considers you worthy enough to issue a credit card .
You: The company picks up all the travel and entertainment bills.
# The cardholder has to maintain an account with the bank and every fortnight a bill is sent to the branch and the amount debited from his/her account. If there are insufficient funds in the account, then the rates charged on overdrafts are levied on the balance amount to be paid.
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