When you open a bank account you are likely to be asked to hire an orderly account and a credit card. But you probably do not know that these two products can be similar, being prudent to opt for one of them. How to choose?
When a client chooses to open an orderly account with a bank, almost automatically, he is granted an overdraft (ceiling) which, as a general rule, can reach 100% of the salary (in practice, the authorized overdraft is one of the causes of family financial problems).
How It Works
The requested account may have an associated credit line. This ceiling should act as a support or liquidity guarantee for difficult days. In this way, the client knows that he has always liquidity to cope with contingencies, committing himself to return the money to the bank when he receives his due date.
Whenever the account requested does not have money available (the positive balance) the movement happens based on the authorized balance, thus obtaining the account in negative, but having the prior authorization of the bank (which means that it will not pay overdraft commissions).
As we are talking about ordered accounts, every 30 days will noticeably occur to credit of maturity that will regularize the balance to negative plus the respective charges (commissions and interest).
Some banks begin offering free periods over authorized overdrafts, and these periods can go as far as 30 days. However, there are rare ones that offer even the 30 days.
How Credit Cards Work
Basically a credit card is a means of payment that also has an associated line of credit. This line allows the purchase of goods or services without needing to have the money available.
To use the money by credit card, the customer undertakes to return the same money according to pre-defined rules in a contract. You can return 100% at the time of maturity and in this case you do not pay interest (the interest-free credit period varies from 20 to 50 days). You can return a lower value that will be at least 3% -5% of the amount due.
Ordained Account or Credit Card?
It is true that there are many bank customers who have these two products at the same time and who manage them properly. However, having two credit products has double the chance of something going wrong. So we suggest you choose one of the products, taking into account some characteristics that differentiate them.
Of all the characteristics of these two products
The Credit Card May Have Fewer Commissions
Overdraft access to ordered accounts usually does not have a commission, such as commissions for opening or renewing overdrafts. However, more and more commissions are applied when credit is used (even if it is only € 1).
In the case of credit cards the only commission that is usually the annuity of the card, which can still be avoided by choosing cards without annuity or by making the minimum amount of purchases that exempts this commission.
Attention to Credit Card Delays
Although you may have fewer commissions, using credit cards is a serious danger to your personal finances. In fact, if you do not have money available you will be charged with very penalizing commissions, such as late fees, late fees, commission for issuing the second round of statements, etc.
Similarly, overdraft accounts also penalize when the customer does not meet the contractual conditions, such as the penalty rate for exceeding credit plus a commission.
When the customer has a correct use of both products, the credit card stands out due to the inexistence of charges, since there is no place for interest or annuities if you choose a card without them.
Interest on the Ordained Account is Lower
Definitely the overdraft interest of the ordered account is lower than the interest of the credit card. Therefore, we could say that the ordered bills thus outweigh the credit cards.
However, credit cards have a free credit period that exceeds the potential of an orderly account, thus being at an advantage and allowing the user to benefit from up to 50 days without interest.
This advantage is guaranteed and does not depend on the bank where you open account, all credit cards have this functionality.