Why should I get a credit card when I can just use my debit card? This is a question that has one time or another run through our minds, right? After all, a credit card is a debt card.
But what if I told you there are many benefits of using a credit card over a debit card? For example, using a credit card allows you to build on your credit history while also earning valuable rewards on the side.
However, before you call your bank for a credit card, you must understand the difference between the two so that you can make the right decision to suit your financial needs.
Using a debit card is the same as spending your money. Your bank issues a debit card to allow you to access your money without the need to write a check or make cash withdrawals. The card is linked directly to your current account and allows you to use it the same way you would a credit card, except the money you spend is directly deducted from your account balance.
When you swipe your debit card to make a payment, the money is deducted from your bank balance and placed on hold by the bank for 24 hours or more before it is released to the merchant.
You can also use a debit card to withdraw money from the bank counter or an ATM using a unique personal identification number (PIN).
Unlike a debit card that allows you to spend your money without incurring any debt, a credit card is a debt instrument that allows you to spend borrowedmoney conveniently. The amount you can spend depends on the credit limit you qualify for.
When you make a purchase on a credit card, the amount is added to your outstanding balance. You are supposed to settle this balance before it falls due, after which it will start accruing interest. Most credit card issuers in Kenya have an interest-free period ranging from 30-55 days.
Most credit card issuers offer rewards and privileges to their cardholders. For example, you can earn loyalty points, cash backs, and various other perks from just using your credit card.
Debt expense on credit cards can be notoriously high if you do not use them responsibly and settle your bill on time.
Essentially, both debit cards and credit cards give you extra security against fraud, giving you the convenience that comes with eliminating the need to carry cash. However, they do have several key differences:
As you can see, each has its advantages. Therefore, choosing what is best for you depends on how you plan to use the card and how responsible you are as a card user.
Hence, before you pick one, it is crucial to understand the difference between the two; the risks, benefits, fees, and uses. Here are some of the main factors to consider to ensure that you get maximum benefits from your card.
All in all, the final decision will depend on your own private judgment and your general financial standing.