Debit and credit cards may seem alike on the face of things, but work in totally different ways. For a credit card, you have a credit balance that you keep eating in to every time you perform a transaction. Every month your lender will write to you telling you your new balance and asking for a payment, that is somewhere between the minimum payment and the full amount.
A debit card is much simpler. You have a bank account and every purchase debits that account. When the account gets to zero, the card no longer works.
So a disclaimer – stop reading right now and instead go for a debit card if you cannot handle credit. If the thought of being able to spend thousands of dollars or pounds of someone else’s money fill you with delight the dangers could outweigh the benefits. You could end up in debt, so avoid a credit card.
But if you can handle credit then a credit card can hold many advantages for you. If you think you can but can’t trust yourself, speak to your lender and request a low limit. Once you hit that spending limit the card stops working.
So, what are the advantages?
Rewards
If, like me, you pay off your balance on time every month then you do not need to look around for a card offering a low rate. Instead, you can look at the rewards cards. Now they might only offer you 1% or even 0.5% back on everything you spend, but if you are incurring no charges then getting something back is a bonus.
Easier to travel
Credit cards can make travelling a lot easier. Look around carefully and you will be able to find some that offer commission free currency exchange when you are using your card abroad. Buy something in a foreign currency and it is converted at a favourable exchange rate without fees. It is safer than a lot of cash and can work out cheaper.
Hotels and car hire
Many hotels and car hire firms want to take a swipe of your card when you arrive. This is so that if you walk away without paying bills then they can charge your card. It does work on a debit card, but at the point that they swipe your card they have just had a set amount authorised. On a debit card that money in your account is then locked until they release it.
Safety
Saving the biggest to last, this is the main reason for a credit card over a debit card. It is much safer. Consumer credit protection gives you protection on a credit card that you do not see on the debit cards. If your card is lost or stolen, or the details are misused on a website, then with a credit card you have far more protection. Likewise, if you buy something and the firm fails to deliver, it is a credit, not a a debit, card that gives you the extra protection and the chance to get your money back.
However, as I have already said if you cannot handle that amount of credit, then forget it!
Source by Keith Lunt
