In finance, the term debit denotes a negative transfer of assets. A debit may be a fee, an interest charge, an expense, a transfer or the removal of assets from an account.
A debit occurs when assets are transferred from an entity to another party for any reason. The term credit, on the other hand, represents a positive transfer of assets to an entity from another party for any reason.
In relation to bank accounts, the term debit describes a transfer of assets out of an account (to a different account, for example) or a demand for withdrawal in cash. Debit transactions from checking accounts (private accounts) can be authorized by the account holder at their bank or remotely via telephone, postal mail or the Internet. Debits can also be authorized by means of a debit card, a check, a checking card, a mobile wallet or (in the case of money withdrawals) by an ATM card.
In the case of interest, the term debit denotes an interest charge while the term credit denotes an interest yield. Debit interest is interest which you pay for a loan or when you use a bank account with a negative interest rate. For example, you may pay interest on a personal loan, a mortgage, a credit card loan or a business loan.
Credit interest is interest which you earn on loans. For example, you may earn interest when you lend your money to a bank in exchange for a bank account balance or by buying medium-term notes, when you lend money to a company or government by buying bonds or when you invest in peer-to-peer loans or private loans.
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