November 13, 2009
Credit Cards vs Debit Cards
To compare credit cards with debit cards, you should look at the pros and cons of each option and you should weigh these pros and cons against each other before making a decision. Common advantages are convenience since you do not need to carry cash around and because you can buy from anywhere in the world. Another common advantage is that you can use credit cards and debit cards in any part of the world. This means you do not need to worry about changing your currency to the local currency. The two cards are similar in the way they work. You can use them in the same machines and all you do is swap your card and the purchase goes through.
Pros of credit cards
The greatest advantage of using a credit card over using a debit card is that you enjoy credit up to a certain limit. This means you can use a credit card to buy an expensive product of service even if you do not have money in your account. This is also important in times of emergency. There are many credit card companies and as they try to attract new clients and to retain the ones they already have, they offer incentives such as purchase protection, extended interest free periods, cash back, rewards points, and other incentives.
Cons of credit cards
The greatest disadvantage of credit cards is that you can get into high levels of debts since the limit is higher than what you have in the bank – these can become unmanageable. There is a risk of credit card fraud such as identity theft. Credit card companies are notorious for high interest rates on any balance that is not paid in full at the end of each month.
The pros of debit cards
With debit cards, you enjoy the same convenience and ease of making a purchase as credit cards, but at a lower risk. There is a lower risk because you only get to use the money that is in your account, meaning there is no risk of you running into debts. You enjoy other benefits such as extended purchase protection. There are no penalty charges and interest with debit cards.
The cons of debit cards
The greatest disadvantage of debit cards is that you will not get a card unless you have money in your account. This means if you are in your first job or you have recently used all your savings in something else, you will not be eligible for a debit card. When there is an emergency and you do not have money in your account, a debit card will be of no use. With debit cards, you do not get additional benefits that come with credit cards such as cash back and rewards. Just like with credit cards, there is a risk of identity theft since you have to give your debit card information when carrying out online transactions. Not all banks offer debit cards – this means you may be forced to change your bank or stay without a debit card if you are in such a bank.