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Why your credit card isn’t a credit card

December 09, 2019 by Hans Bousquet-Lafond
credit card vs debit card vs prepaid card

You may be disappointed by this, but you don’t have a credit card with Qonto. In fact, the term ‘credit card’ is often a misnomer.

Real credit cards are not very widespread in Europe. It’s a very British and American payment method that most banks offer but which few of you use.

Yet revealing this leaves you (for the moment) with 2 questions and no answers.

First of all, if you don’t have a credit card, then what is a credit card? 🤔

You are also right to wonder:

What do I actually have in my wallet? 🤨

Don’t panic, all the answers are here. 

What is a credit card?

As its name suggests, it’s a card that gives you credit. Literally.

Let’s take an example: you are going to Chicago on a business trip. You, therefore, have to buy a plane ticket, book a hotel room and pay for your meals.

But with your credit card, each purchase you make is not debited from your bank account. In reality, they are all paid for by your bank, up to the limit you have set together.

It sounds like a great idea, don’t you think? 

Except that at the end of the month, a few days after you get back from your trip, you receive a bill from your bank. It’s for everything you spent in Chicago but that’s not all: you also find all the transactions you made during the month with your credit card. 😣

You know the score: you have to pay all the credit back.

So if your bank lends you money, it’s expecting you to pay the bill. And because this credit is renewable, the same thing happens the next month. And the next month. And the ne... You get the picture!

📌 Note that a credit card may sometimes be useful if you have to spend a lot and you don’t have enough cash flow for example. But it means that you must manage your finances extremely well, because any late payment when paying back the credit generally adds costs.

With Qonto, you will never receive this type of bill. We have never granted credit. Maybe we will one day, who knows? But in the meantime, we have to find out what type of card you have. 🧐

What type of card does Qonto use?

Scenario 1: a prepaid card

Before, when we used to talk about prepaid cards, these were often SIM cards that you could find in the general store. But recently, things have changed.

We are seeing prepaid payment cards pop up everywhere. They enable you to make as many card payments or withdrawals as necessary... as long as there’s enough money on them. You then have to top up your card to be able to use it again. 

So, you’re going to say that that’s exactly what you do with your Qonto card: you can spend the money you have in your current account, as long as there’s some there.

But that’s where the main difference lies.

A prepaid card is not necessarily linked to a bank account. 🏦

In concrete terms, the money you have topped up on your card is only stored in an electronic wallet (which is sometimes called a payment account). This wallet is not therefore necessarily linked to an IBAN for example. However, with Qonto, you have a bank account with all the services that go with it: SEPA transfers and direct debits for example.

Another thing: your Qonto card protects you against the risk of fraud, travel contingencies or work accidents, while most prepaid cards have no insurance.

In addition to not being a credit card, it would seem that your Qonto card isn’t a prepaid card either. And so there’s only one scenario remaining. 🤓

Scenario 2: a debit card

Even if we never call them by their real name, debit cards are the most widespread card in France and Europe.

With each payment made with a debit card, the amount is debited directly from your bank account. Logical, right? This means that the transaction is only approved if you have the necessary funds unless you have an authorized overdraft.

At Qonto, each amount spent is deducted straight from your business banking account, and you are automatically notified on your app. So what you have in your wallet is indeed a debit card. 

For us, that’s the right balance: unlike credit cards, you keep control over your cash flow. And at the same time, you enjoy the services and security that a business banking account offers, which a prepaid card cannot. ⚖️

The question is now: ‘which debit card do you have?’ For the time being, we offer 3 very distinct cards: the One card, the Plus card, and... Oh no, we only offer 2! At least, for the time being. 🤫

📌 Some of you may remember: at the outset, Qonto offered prepaid cards. That was right at the start of the adventure! But since then, we have grown, and our services have evolved. And in a few months, any of these cards that are still active will be replaced by debit cards.

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