How a credit card differs from a debit card

At this point, I am confident that the haziness that clouded the knowledge of credit cards has been cleared somewhat.

However, how the card differs from a debit card is still an issue for many and in this article, I will attempt to clarify the differences, beginning with some scenarios.

Scenario One

Kojo’s wife had had a new baby the week earlier and had spent all the money in his current account on hospital bills. The baby food they had stocked up ran out earlier than anticipated. So his wife, Araba, asked him to get some from the grocery shop around the corner. After filling his shopping basket, Kojo proceeded to the counter to pay his bill.

Kojo gave the lady his debit card forgetting that he had emptied his account. After two dips to pay the lady breaks the rather unfortunate news to Kojo.

He did not understand why a bank he has been with for the past two decades would not allow him to withdraw money he did not have in his account so he pays back later. Clearly, Kojo had mistaken a debit card for a credit card.

Scenario Two

Ama, a Business Executive, meets up with her friends on a Friday night for an after work hangout. She promises her friends she would cater for the bill and all they had to do was to show up. After an exciting evening of food, drinks and laughter, Ama reaches for her bag to pay for the bill. She takes out both her credit and debit cards.

Ama remembers she has no money in her bank account so she hands a credit card to the waiter for the payment and she is sorted. She would settle her bank later.

These are everyday scenarios that most of us find ourselves in, in the usage of debit and credit cards. Debit cards and Credit cards are very often confused in terms of their use largely due to a lack of knowledge on the uses and qualitative differences between the two cards. Debit cards and credit cards function in similar ways. Both carry the logo of a major card issuer, such as Visa or MasterCard, and can be dipped, tapped or swiped at retailers to purchase goods and services. Below are some differences between the two:

The distinction between debit and credit card becomes blurred if a debit card user decides to obtain an overdraft. In this case, whenever a person performs a purchase transaction more than money available in his or her bank account, the bank will allow the person to overdraw the bank account up to the limit granted to cover the purchase transaction. The bank account-holder is then obligated to repay the full overdrawn amount with interest.

However, a credit cardholder will get up to 55 days interest-free, which means they have interest free credit if they decide to pay back their outstanding account balance in full each month.

The credit card market in Ghana is an emerging one characterized by lots of apprehension by consumers largely due to a lack of understanding of the uses and benefits of the card. Even for the ‘Kojos’ and ‘Amas’ out there who have acquired the card, its appropriate use is a huge problem. Credit cards have lots of benefits for consumers when used appropriately and for the right purposes but for a start, identifying its qualitative difference from a debit card is critical for consumers to appreciate the card.

Emmanuel Nii Odartey Lamptey

Head, Card and Payment Solutions, Stanbic Bank