Owing to the ever changing technology, many people over the years have been adopting new and innovative ways of banking, running their accounts and making payments. In the earlier days, before widespread use of cards, getting credit or making payments was either in form of cash money or written cheques. Although cheques are still used by many people in Kenya to make payments, electronic money transfers are fast taking over payment and receiving transactions.

The reason for this is the uptake in plastic-card money usage by many banked individuals. Most people who run bank accounts, both current and savings use debit cards to access their money from the accounts. Credit card holders have arrangements with their banks or financial service providers to use their cards to pay for good and services on credit and pay at later dates.

What is the difference between credit cards and debit cards?

Credit Cards

A credit card is a payment card issued to users by a financial services provider as a system of payment. It allows the cardholder to pay for goods and services based on the holder and financial services provider agreement to pay for the same. The issuer of the card (bank or finance institution) creates a revolving account and grants a line of credit to the the card holder or user from which the user can borrow money for payment as a cash advance to the user.

Based on the arrangement between the two parties (holder and issuer), a credit card usually attracts an interest on the amounts used, paid by the holder either monthly or annually. Credit usage in Kenya is quickly gaining popularity mainly due to the growth of the middle class and conveniences that come with use of cards especially when traveling.

Banks and other credit card issuers usually dictate terms of use of the card based on the applicants ability to pay back the money they use on the credit cards (credit-worth.

Debit Cards

A debit card is an electronic card issued by a bank which allows bank clients to access their account for cash withdrawal or pay for goods and services. This card is what is commonly referred to in Kenya as an ATM (Automatic Teller Machine) card. Debit cards have greatly reduced the time bank customers spend in the banking halls for depositing or withdrawal of cash since these services have been automated through the cards.

In the recent days, many banks in the country have made partnerships with retails stores and other service providers to allow their customers to use debit cards. Debit cards allow holders to pay for utility bills, pay for goods at points of sale, withdraw cash and even transfer cash. This type of card, as a form of payment, also removes the need for writing cheques as the debit card immediately transfers money from the client's account to another account with minimal authorization by the holder.

Most issuers charge a fee on specific transactions undertaken on the debit card. In Kenya for instance, a standard fee on withdrawals and bill payment is set at KES 30 for most banks Some transactions on the debit card are however free, while others like trans-bank withdrawals are charged at higher rates.

Majority of Kenyan account holders have debit cards.

Fact File

• Credit Cards are used on credit basis based on the holders ability to pay the money later
• Debit cards are used based on the holder's account value with overdraft allowed in limited cases
• Credit card holders are charged an interest on the credit advanced to them as agreed with the issuer
• Debit card holders are charged a fee on transactions they perform using the card