Despite the emergence of e-wallets, debit and credit cards remain the most accepted payment methods. These cards provide quick, secure, and contactless online and retail payments. However, you might struggle to choose between debit and credit cards for online transactions. Each payment option has pros and cons, although they may look similar on paper. In this write-up, we’ll discuss all the similarities and differences between debit and credit cards to help you make an informed decision.
What Are Debit Cards?
Debit cards are also called check cards or bank cards. You can use these cards to pay for goods and services to and from a checking account. Debit cards can make payments at retail points of contact or online retailers like Amazon and eBay. You can also use it to withdraw cash at an ATM.
The main thing about debit cards is that your spending is limited to your checking account balance. In other words, you can only use the money that you already have. Usually, the amount is transferred instantly from the affiliated account. However, ATM and other transaction fees might apply.
What Are Credit Cards?
A credit card functions like a debit card to some extent. It’s a thin Mastercard or Visa card issued by banks and other financial institutions. Like debit cards, these cards can pay for services and goods online or offline and withdraw cash from ATMs. Businesses that accept credit cards have a sign showing customers what cards they accept.
However, as the name suggests, credit cards allow cardholders to spend cash they don’t have. Put simply, you can borrow funds to pay for goods and services. After borrowing, you must repay the amount plus any applicable interest by the billing date. The interest will continue accumulating if you fail to repay the credit on time.
Credit or Debit Cards Pros and Cons
Credit and debit cards might seem similar. However, these financial products can be very different, at least in terms of operation. For this reason, knowing the advantages of using both cards is vital to make a wise decision. Let’s take a look!
Advantages of Debit Card Payments
Widely accepted: Debit cards use popular processing networks like Visa, Mastercard, and American Express. This makes them acceptable almost worldwide. With debit cards, you can make payments and shop online if you have enough funds in your account.
Use what you have: Borrowing to play is among the reasons why the use of credit cards is not supported for gambling. In the UK, for example, online casinos have stopped accepting credit cards since April 2020. This means UK players can only use debit cards, e-wallets or bank transfers to make payments. Among these options, bank transfers tend to offer better security and more convenience. Presently, there are a variety of top bank transfer casinos available to UK players.
Easy to get: You can walk into any commercial bank and apply for a debit card with an active account. The bank won’t consider your credit history or score before approving your debit card application. However, this could be different, depending on the financial regulations in your country.
Advantages of Credit Card Payments
Credit cards are safer and better to use than debit cards for multiple reasons, including:
Build a strong credit history: Credit cards can help you build a positive lending history if used responsibly and regularly. This card reports your spending and payments to lending agencies, allowing you to create a strong credit score. You can build a good credit history by making regular payments and avoiding late credit repayments.
Financial safety: Credit cards provide several layers of protection compared to debit cards. For example, if someone steals your card and makes purchases, you won’t be responsible for the purchases while the bank reviews the fraudulent activity. The opposite is true about debit card payments.
Dispute unauthorised payments: If unsatisfied with the goods and services provided, it’s easy to dispute credit card payments. For example, an online retailer can ship you the wrong or damaged product. In that case, you can initiate a dispute if the merchant refuses to refund your payment.
Earn credit card rewards: Debit cards rarely provide rewards for spending money. Credit cards, on the other side, can provide multiple incentives to encourage cardholders to borrow and spend money. The Discover Cashback credit card is an excellent example. This card can reward holders with 5% cashback on purchases.
Credit or Debit Cards: Make a Choice!
The choice between debit and credit cards should depend on your spending habits and financial condition. If you struggle to control your spending, getting a debit card is the best solution. Also, use a debit card if you already have a credit card balance. The idea is to avoid increasing your credit balance, which can come with high interest rates.
On the other hand, credit cards are more financially rewarding if you’re more responsible and prudent with your spending. You can maximise the credit card benefits by repaying your credit on time and tracking your spending. Avoid the urge to borrow when you don’t need to. Remember, poor financial choices can reflect who you are.