There’s a healthy debate going on as to which one is a whole lot better: debit card or credit card. Both have their own advantages and disadvantages. You may want to get to know more about them, so you can make a much better choice.
Debit cards are gaining popularity especially for those who are tightening their belts. Debit cards can work like any regular credit cards. When you make a purchase in your local grocery store, the cashier can just swipe the card, and you’re good to go. You can also utilize the same card to make purchases online. Debit cards these days can be MasterCard and Visa.
However, there are also a number of differences with the credit cards. Take a look at the following:
It’s automatically deducted from your bank account. Yes, for you to have a debit card, you should also have a bank account, which is usually a savings account. Every time you make a purchase, the amount will be instantly debited from your savings account.
You don’t incur debt. In general, you really don’t acquire any debt when you’re using a debit card. This is because it’s highly dependent on your bank account. Once the balance is completely maxed out, then the debit card may no longer be of use unless you’re going to replenish the account.
Nevertheless, certain banks have good offers. One of these is called an overdraft. You can take advantage of it whenever the balance in your account is already negative, but you still have to acquire some funds. An overdraft has a limit and has a fee, but you can extend your debit card use a little bit longer.
It can be used in an ATM. Debit cards can be used in several automated teller machines all over the world. That’s why it is convenient to carry around. It’s also much better than issuing checks when you’re making purchases.
You don’t need any banking statement. The truth is you don’t need a statement of account, since you’re not going to make any repayments. You may, however, look at it once in a while to keep track of your spending habits.
There are downsides, of course. For one, you cannot build a credit history with debit cards. So no matter how good of a consumer you are, it will go unnoticed by lenders. Second, debit card fraud is rampant. All the thief has to know is the bank account number, which is printed in the debit card, to wipe away all your savings.
Credit cards still remain a very popular plastic in the entire world. Hundreds of thousands of people apply every year for one.
Here are some of the advantages of using credit cards:
You can enjoy a very huge credit limit. Credit limits are normally based in your salary, but expect them to be far higher than what you could actually save in your bank account. There’s no limitation on how you’re going to use the credit card.
It’s more acceptable than a debit card. Virtually all shopping websites accept credit cards. Transactions are much easier and faster with them.
You have a good amount of time to pay off the debt. Though credit cards are really debts, you are given ample time to come up with the funds for repayments. Your debt today will be due after 30 days. You basically have at least a month to figure out how to pay for your debt.
There are plenty of rewards. To encourage consumers to use credit cards, companies would often come up with great deals for them, from dining to entertainment. Some credit cards build frequent flyer miles, which can be converted to airplane tickets or discounts in accommodation when you travel.
You can establish credit history. The credit report will list down your credit cards and how well you pay your debts to them. If you’re a faithful payee, your credit history will look good. It’s much easier for you to apply for loans, insurance policies, and even other credit cards.
There’s protection offered. As a credit card owner, you may be extended with a variety of protection, such as refunds of goods lost and stolen or damaged, extended warranties, and travel insurance. You can also depend on a 24-hour customer support. If you’re a big-time client, you can have your own accounts manager.
There are, however, risks involved—a lot of them. Many have found themselves struggling in debt because they were careless in using credit cards. Paying off the minimum amount only increases your interest repayments. Thus, the debt seems endless. Marketing hype can blur your vision when it comes to using credit cards. Credit cards are also prone to fraud or identity theft. There are so many associated fees with credit cards, including over-the-limit fees and late charges.