Credit cards and debit cards have the exact same benefits. Each card, however, has its own specific purpose, which is good to know when you are trying to budget to reach a financial goal.
Credit card – Pros and Cons
- If your financial goal is to purchase a house or vehicle, a credit card, will help you build up a reputable credit rating (scoring).
- Many credit card companies offer rewards programs to entice customers to purchase with their credit cards. While some will allow you to earn points which you can redeem at affiliated partners, others will offer cash back on purchases.
- If you lose your card or it is stolen, anyone can make purchases with your card as no pin is required for purchases. Depending on the credit card company, you may be reimbursed for stolen cash.
Debit card – pros and Cons
- Payments deducted directly from your bank account, you can therefore better monitor spending habits and stay within your budget
- Debit cards are pin protected, but should you card be lost or stolen and thief has access to you pin, it’s difficult to dispute costs and you remain liable.
A credit card essentially allows you to make a purchase on credit, which you usually repay all at once at the end of the month or over an extended period.
|Unlike a credit card which allows you to pay later, debit card purchases are taken directly from your bank account.|
|Service fees||Yes||No (depending on plan)|
|Application Process||Complex as one needs to be approved based on current rating||Open to anyone with an ID Document and Proof of Residence.|
|Interest Charged||Interest charged if full outstanding balance is not paid. Interest usually high||No interest charged as no money is borrowed|
While the choice to apply for a credit card remains in your hands, especially since a credit card gives you extra fire power in terms of purchasing power. If you aren’t able to control your spending habits or do not pay the full installment on your monthly credit card balance. You may want to stick to a debit card, as you’ll find it extra hard to spend within your monthly budget.