In Part 1, we explained how debit cards and credit cards work, as well as some of the differences between the two.
Now let’s delve in and look at some of the advantages and disadvantages of debit card vs credit card.
Advantages of debit card
• Since money is directly deducted from your savings account, there will never be any trouble with debt! Debit cards are perfect for those who always find themselves constantly in debt as you can only spend money that you have.
• It is easy to apply for a debit card. It usually only requires that you have a savings or current account with the bank. No credit checks!
Disadvantages of debit card
• While it is hard to overspend since actual money from your bank account is being used each time you swipe your card, there can be times when you might overdraw your account. This might lead to the bank charging an overdraft fee.
• Unlike credit cards, debit cards seldom have rewards programs and services.
And now we move on to credit cards.
Advantages of credit card
• Credit cards allow you to use money that you don’t have…YET. In other words, you can make purchases anytime, anywhere, as long as it is within your credit limit.
• Credit cards can improve your credit score. Punctual payment of your credit card bills can improve your credit score, which in turn allows you to obtain better rates for other loans.
Disadvantages of credit card
• Interest charges. Using a credit card is like using borrowed money and when you use borrowed money, interest charges will apply. If you don’t pay your bills on time, you might end up paying more than you think for your purchases.
• You are using money that isn’t yours. If you don’t have enough money to pay off your credit card debt at the end of the month, there is a risk that you will start building a huge pile of debt, and end up in a bad financial situation.
