Credit versus Debit: Which is the best card for you?
While credit and debit cards share many physical features, the way they work is completely different.
The key is in the name: A debit card lets you spend your own money in the same way you might use a standard EFTPOS card, yet with the versatility of a credit card. On the other hand, a credit card allows you to spend the issuer’s money and could be seen as being closer to a personal loan than an EFTPOS card.
Here are the pros and cons of each card, so if you’re not sure which is better for you, take note!
Credit card pros
For many, the biggest attraction of credit cards is that you can shop online – this is one of the most popular uses worldwide. Using a credit card responsibly is also a great way to boost your credit score. With regular use and regular repayments, the card will help you maintain good standing for borrowing in the future.
Credit cards also provide a great deal of security, for example, Beyond Bank’s low rate visa comes with the Visa Zero Liability Policy, protecting you in the event of theft. This policy means you would not be liable for purchases made on the card you didn’t make or authorise. Furthermore, this low rate visa comes with smart chip protection, keeping you safe from skimming, counterfeiting and other card scams.
Credit card cons
Some credit card owners have the card in case of emergencies. While this is a fine way to approach credit, it can be problematic in practise. If you’re using a credit to make ends meet, how long before the balance is exhausted? If you aren’t making enough money to cover your living costs, how can you realistically repay your credit card balance without incurring additional fees? Extra interest and late payment fees could make this situation worse, have a negative effect on your credit score and ultimately could make things more difficult for yourself in the long run.
Debit card pros
As with credit cards, one of the greatest reasons to own a debit card is the ability to pay for goods online. Outside of this, the most important factor in debit card use is that transactions are free. While credit cards have annual, late payment and interest fees as well as often including a percentage-of-purchase fee on every transaction, debit cards won’t cost you to use.
Debit cards also present a much easier way to control your spending. Since you’re using your own balance of funds, you can only spend the money you actually have. This can be very beneficial if you’re a spontaneous spender or don’t closely adhere to a budget, and the temptation to buy now will be culled if you can clearly see the choice is between making a purchase and retaining enough for your day-to-day life.
Debit card cons
Since debit cards have improved security features and are accepted anywhere a Visa or MasterCard would be, they are actually highly beneficial. Since Beyond Bank’s Visa debit cards offer the same security features as the low rate Visa, there a few cons associated with debit cards. Perhaps this is the reason Finder has reported that there are almost 45 million debit cards in circulation in Australia, compared to less than 17 million credit cards (as of June 30, 2017).