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Payment by credit card can be subject to two different payment options. This is either immediate payment or deferred payment. However, the vast majority of credit card holders choose immediate payment. What are the advantages and disadvantages of deferred payment, and why so few French people subscribe to it?

What is deferred debit payment?

Deferred debit consists of grouping your monthly payments together to pay them only once per month. All your expenses are withdrawn at once. This means that you can pay for purchases with your card without having the funds available in your account. However, at the time of the monthly withdrawal, you must absolutely have the sum corresponding to all of your expenses for the month, otherwise you will have significant fees to pay to your bank. As you will have understood, the deferred debit payment is a very short-term loan, granted automatically by the bank to the beneficiary of the card. Subscription to a deferred debit payment is made at the time of subscription to the contract which gives access to the bank card. It is possible to have both options simultaneously and thus have immediate payment and deferred payment on the same card. However, in the event of a cash withdrawal, the sum will be immediately debited from your account, even in the context of a deferred debit bank card. Obtaining this type of card may be subject to income conditions at some banks.

What are the advantages of deferred debit payment?

The advantages of deferred debit credit card payment are obvious. Indeed, it is possible to spend more than what you have for a short time. For those who have some money aside, this can be interesting, because this sum can be used or not. In detail, a person has 10,000 euros aside, he subscribes to a bank card benefiting from deferred debit payment. She incurs expenses during the month, and at the time of the withdrawal, if her income for the month is not sufficient to settle the debt, she can dip into her savings. This implies that savings are always available. Choosing a deferred payment card has advantages for learned bank account managers. Those who know how to make their money work and take their account are those who benefit the most from this system. Indeed, it is then possible to invest your money during the current month and to make capital gains in the very short term. It is therefore a practice reserved for connoisseurs of financial tools of all kinds … But what about others?

What are the disadvantages of deferred debit payment?

There are, however, downsides to deferred debit payment. Already, bank charges … In traditional banks, they are higher than when you choose immediate payment. If the fees are too high for your liking, you can, like many French people, decide to use your negotiating skills and try to reduce the amount of fees. Another disadvantage, of a psychological nature this time, is impulse purchases. The fact that you no longer have a payment limit creates the illusion that you no longer have a limit in your budget. Some people then start behaving unreasonably and incur more expenses than they can afford at the end of the month. This gives rise to significant costs and can jeopardize the financial situation of the person who takes out this type of contract. This attitude is quite natural since you have no visibility on your expenses, unless you keep a precise book of accounts on a daily basis. So who are the winners of the deferred payment card? Ultimately, it is the banks that derive the most benefits from this type of product. When you use your bank card at a merchant, the latter pays a commission to the bank. In the case of an immediate debit payment, the commission is capped at 0.2% of the total purchase. In the case of a deferred debit card payment, the commission increases to 0.3%. You will understand, banks have every interest in making you subscribe to this type of contract. It’s up to you to define your level of control over the budget and financial tools to make a conscious choice.

(By the editorial staff of the agency hREF)

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