French Banks Cards - Debit or Credit?
Tuesday 07 August 2018
Bank cards in France are now ‘débit’ or ‘crédit’, but the descriptions are imposters.Anyone who has recently received a new French bank card may have noticed that it is marked either ‘débit’ or ‘crédit’.
Anglo-Saxons maybe forgiven for assuming that the former is used for payments that are debited from your account within a day or so, whilst the latter offers a borrowing facility up to an agreed limit.
In reality, this interpretation is only correct in the case of debit cards; those marked 'crédit' have an entirely different meaning.
Arising from new European regulations, all new banks cards now have to be either categorised as immediate debit (débit immédiat), or deferred debit cards (débit différé).
The latter, marked ‘crédit’, are offered by the banks to those customers who would prefer that all their debit transactions during the month took place on a single date.
They do not, by themselves, offer any kind of overdraft or borrowing facility, which would need to be agreed separately with your bank. In addition, cash withdrawals with these cards are debited immediately.
As a general rule, the vast majority of French nationals use immediate debit cards, no doubt preferring to be able to manage their transactions and their balance in 'real time'.
However, that has not stopped many banks from trying to encourage their customers to switch to a deferred credit card.
In doing so one of the advantages they may well stress to clients is the simplicity of managing a card where all your expenses are deducted in one go at the end of the month, instead of having to monitor the account on a more regular basis.
In some cases, the bank may also be offering a deferred credit card for a cheaper annual charge than for immediate debit card, a most surprising offer given that the former effectively offers an interest free line of credit for the month.
A recent study showed that charges for an immediate debit card over the past year had increased on average by 2% (in some cases far larger), whilst those for deferred debit cards had fallen by 0.8% over the same period. Once again, some banks had reduced their charges for such cards by substantially more.
However, what the banks do not state is that there are also financial advantages to them by getting you to make the switch.
This is because with the adoption of the new system of categorisation European regulations have changed the basis on which banks are paid by sellers when the cards are used in their transactions.
Fixed fees are no longer permitted, with the bank only paid on the basis of a percentage commission, which itself is also capped. For immediate debit cards the commission is capped at a maximum of 0.2%, whilst for deferred debit cards it is 0.3%.
Given that in France there are around 12 million card payments each year, amounting to €600 billion, it is not difficult to see why some banks may have a preference for the type of card they wish to offer to you.
This article was featured in our Newsletter dated 07/08/2018