Debit cards or credit cards?
3 September 2008
Many people fear they will overspend if they take out credit cards and prefer the option of debit cards. Unfortunately, this is often in ignorance of the disadvantages of debit cards compared to credit cards and views credit cards in the wrong way. Looking at credit cards as a line of credit and debit cards as a convenient form of payment shows a lack of understanding about the financially most responsible ways of using credit cards.
Debit cards require you to already have money to spend using them. In terms of the payment options they allow, they function much like credit cards. Spending with debit cards is unlikely to offer any advantages, though, unlike using premium credit cards. Some providers may offer benefits for users of debit cards, but they are unlikely to be as good as those offered on credit cards, as the card issuer has no reason to provide incentives for you to spend with your debit cards.
Premium credit cards such as gold credit cards, platinum credit cards and reward program credit cards can actually work out to be save you more money than debit cards if you use them correctly. By avoiding interest with interest free days on purchases and not overextending your finances by using credit cards as alternative forms of payment rather than as lines of credit, you can earn a values of rewards with reward points in order to not just cancel out your annual fee but to also make a profit on top of that. As long as you stick to a mindset of only spending money you have rather than using credit in an irresponsible way, you may be able to make money rather than lose it by making use of premium credit cards.
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