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Debit Card Vs Credit Card: Which is The Best for You 

Debit-Credit Cards

Debit and credit cards are so similar. With the same features like expiry dates, magnetic strips, EMV chips, and the 16-digit engraved so boldly on them, one can easily confuse one for the other. 

Aside from their physical similarities, they also have other similarities like they can be used as a payment means both in stores and online. 

However, despite these similarities, they are not the same. Their major difference is that debit cards let you spend money that you have in your bank account. While with a credit card, you loan money from your issuer to either buy items or simply withdraw. 

You most likely have one of each of these cards. They provide so much protection and convenience that it is almost impossible to not have one. But how do you know which is best for you? In this article, we will discuss these cards individually to help you decide which best suits your spending habits and needs. 

Credit Cards – Definition and Categories 

Credit cards are issued by financial institutions, most often a bank. They enable their users to borrow money from the institution that issues them. The cardholders in turn will pay the funds back with the agreed interest. 

These cards can be classified into the following categories:

  • Charge: these do not have a spending limit. However, unpaid balance cannot be carried over from one month to the other. 
  • Secured Credit: an initial deposit is required. The issuer uses cash deposit as collateral for the credits given. 
  • Rewards: travel points, cash back, rewards, and other perks are given to users. You can visit here https://www.bankrate.com/finance/credit-cards/how-cash-back-works/ to learn more about the concept of cash back. These rewards depend on how much the user spends. 
  • Premium Cards: these offer perks like important event access, access to an airport lounge, concierge services, and so much more. However, they typically have a high annual fee. 
  • Standard: as the name implies, this simply gives their users a line for cash advances, making purchases, and balance transfers. They often do not have an annual fee. 

Debit-Credit Cards 

Users of these cards can decide to use rewards cards to earn cash discounts, reward points, and travel points. Debit card users on the other hand do not have these benefits. However, these rewards may either be based on a given rate or be based on a flat rate. 

For instance, a card may offer you 2 miles for a dollar spent, while another may offer 3 miles for a dollar for your travels, 2 miles can be set for dining, while the remaining is set for purchasing anything else. You can use the miles you earn to plan your travel arrangements. 

Advantages and Disadvantages of Credit Cards

When compared to debit cards, credit cards have some major benefits. But, there are still some downsides to using them. To help you decide which will suit you best, we will discuss some of the major advantages and disadvantages of credit cards. 

Advantages 

1. Can Help Users Build Their Credit History 

When someone uses this type of card, the use appears on their credit report. This report typically contains both your positive histories like payments made on time and negative histories like delinquencies and late payments. 

The information on the report is now used to determine the person’s credit scores. If you are a responsible spender, you can take advantage of this and build your score by making timely payments, also, ensure you keep your card balance low. When you have a high score, you can get high loans. 

2. Protects Users from Frauds 

If your credit card is used for a fraudulent transaction, you can get your money back but with a maximum liability of 50 dollars on purchases made after the disappearance of the card. However, you need to report the theft or loss on time. 

Although this protection is also offered to debit card users, the user has to report the theft or loss within forty-eight hours. Afterward, the user’s liability becomes 500 dollars. After sixty days, there cease to be a limit to the liability. 

Debit-Credit Cards

3. Purchase Protection and Warranty 

This type of card sometimes provides insurance and warranties for purchased items. These warranties often extent longer than the item’s manufacturer warranty. 

4. Other Advantages 

They also offer users the chance to dispute goods that were lost or damaged during shipping. If a debit card was used for a transaction like this, the user cannot have their charge reversed except the merchant decides to.

Some rentals prefer the use of them as opposed to the use of debit cards. If the client insists on using their debit card, the agencies will ask for your credit card details as their backup. 

Disadvantages 

1. Can Get the User Indebted 

When you use a kredittkort (credit card), you are technically not spending your money; you are spending the issuer’s money. When you pay back this money, you have to do so with interest. If you are a reckless spender, you may end up owing high balances with multiple cards. 

2. Can Negatively Impact Your Credit Score 

While these cards can help you increase your credit score, when misused they can inversely affect it. If you can’t keep up with the bills and you end up paying late, then this may not be the right path for you. 

3. Fees and Interest 

Some cards have a very high-interest rate. You may want to avoid cards that offer too many benefits and rewards as the more perks you get, the higher your annual fees become. 

Debit Cards – Definition and Categories 

Debit cards are cards used to make payments, the money paid is usually debited directly from the user’s bank account. 

They can be classified into the following categories:

  • Prepaid: This is used by people who do not have access to their bank accounts or that don’t have an account. Funds are preloaded on the card so the user can use it for electronic purchases. 
  • Electronic Benefits Transfer: These are given by federal and state agencies. They allow qualified people to use the agencies’ benefits when they shop. 
  • Standard: The funds are withdrawn differently from the user’s account. 

Debit-Credit Cards

Advantages and Disadvantages of Debit Cards

A debit card also has its advantages and disadvantages like its counterpart credit card. Let us consider them.

Advantages 

1. Avoid Debts 

The money used in this case is what the user has already. Since this is the case, the user does not run at risk of getting indebted. Even as an impulsive spender, you will stick to your budget when you use a debit card. 

2. Absence of Annual Fee

Unlike its counterpart, you do not have to pay an annual fee when you use a debit card. Also, when this card is used to withdraw cash from the bank’s ATM, no extra fee is charged. 

Disadvantages 

1. No Rewards 

You do not stand to gain any rewards or miles or points when you make purchases with a debit card. These are only available to credit card users. These rewards can help you save up some cash when you redeem the rewards. 

2. Can’t Help You Build Credit 

When you have a good credit score, you show loaners that you are responsible enough to pay back the money they borrow you. If you only use your debit card, you cannot build your credit with your purchases. 

Ultimately, the choice of which card to go for is solely yours. But before you decide, properly consider all that has been discussed in the article. Weigh the advantages and disadvantages of both before you make your decision. 

But if you ask us, owning both is a good idea. However, if you are a reckless spender, we are not sure credit cards will work out well for you. 

Conclusion 

We have discussed the advantages and disadvantages of both a credit and a debit card. We believe with this information, you can make an informed decision on which suits you best.


More on this topic:

7 Tips for Using Your Credit Card Safely on Education Websites

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