A student asked, what is the difference between Debit Card, Credit Card and an ATM Card. Speaking of which, not many can differentiate these cards in modern financial market in a well manner. In fact, we have been too used with Credit Card and ATM Card in Asia and even in our own local mart, Malaysia. So, what exactly these cards are and their basic purposes for you in a lay-man term.
Credit Card refers to a card that allows you to exchange goods with credit which you have to settle within the given time frame. This available credit is per-determine when you have your Credit Card applied. The available credit limit is dependent on your cash flow capabilities and subject to various consideration by any awarding financial institution. Credit Card differs from a Clear Card; where bout Credit Card allows much flexible repayment period as compared to Clear Card which much be repaid during or before the final agreed payment due date. In common, the awarded Credit Card will carry the brand Master Card and Visa branding. Both type of cards have their own significant differences which are beyond the scope of this short discussion.
ATM Card or in full refers to Auto-Teller Card allows the holder to access to their financial account monies by withdrawing or to perform substantial transaction on the Auto-Teller machine (ATM Machine) on any allowed transactional time. This card is meant to facilitate and make your banking experience faster and easier. In any simple mind, ATM Card is meant to withdraw money without visiting the bank counter. Though, the transaction is subject to the limit of your banking account and as well to certain non-conventional banking rules (E.g.: Limit of withdrawal, substantially lower amount allowed for account transfer and etc).
The last but not least, Debit Card refers to card that allow you to withdraw and perform any retail transaction without the hassle of visiting any physical ATM Machine. With a seamless transaction taking place on the back end, performing any retail transaction is similar to making a purchase thru Credit Card, but in this case, Debit Card is limited to your account balance. Any transaction amount is deducted directly from your account. This scenario is similar to you visiting ATM Machine, making withdrawal and pay the item you have in your shopping list.
As a consumer, which card should you possess and what are the impact to you? And as a merchant, which card brings benefit towards the overall transaction in your business range.
As a consumer who are limited to the ATM Card may choose to apply for Debit Card. Debit Card indeed save you the hassle of visiting ATM Kiosk or reducing the risk of having physical monies on oneself. At the same time, in many cases, Debit Card offers significant values to the card holder by providing privileges and rebate to the Card Holder. By then, Debit Card will stand to gain from using the card against the conventional ATM Card. But bear in mind, in Malaysia, there is no rule that specify that Debit Card is not subjected to any annual fee.
Although, in our current market, the growth is still young and many banks have not start charging one, your may risk to one in the future when the market is mature enough to absorb this fee. On top of this, Debit Card annual renewal fee is significantly higher as compared to any ATM Card. In average, ATM Card will cost you RM 8 per renewal per year while similarly, Debit Card will cost you RM 12 per renewal per year. Some may argue RM 4 difference is too little to neglect for the benefit that offered, but this provides a significant room for more fees in the future.
For those who are eligible for Credit Card and belongs to the type of consumer that is well aware on their personal spending, you are much encouraged to apply one of this card. Credit Card is a tool that expose a consumer to debt or financially, leverage. Credit Card allows better benefit in terms of saving, privilege and other intangible benefits. These benefits are offered due to the nature of earning that a financial institution get while extending debt to a consumer. While many are aware, Credit Card debt or aka Personal Debt is among the highest income generating among all types of debts extended to a consumer. Looking into this lucrative margin, a better benefit is common to attract more debt taker and defaulter.
Since we reckon Credit Card incurred debt, why do we still indulge to one? As the leverage suggested, debt allows us to leverage the possibility of the monies we have. Purchasing an item without the physical monies in the account is an advantage while we allocate the amount to service back our debt. This type of debt is similar to overdraft. Though, it is a clear beneficial overdraft instead of using Credit Card to build up debts for personal desire items.
There is no absolute winner for any type of cards you wish to own. Cost is totally different with RM 8 for ATM, RM 12 for Debit Card, RM 50 - RM 100 (for common classic Credit Card for primary card holder) + RM 50 Government Tax. With the highest cost on Credit Card, the card still offer the best for the card holder in many cases. With different card and their primary objective, a smart consumer must consider the ownership of the card well. Owning one is easy but to service and the cost of maintenance may not be sustainable to some for long run. Thus, be a smart consumer and assess the best cause for the best impact to our ever shrinking wallet.
No comments:
Post a Comment