Even though both credit cards and debit cards let you make purchases in store and online in addition to letting you get cash from the ATM, they cannot be more different. For starters, a credit card lets you spend on borrowed money up to your credit limit whereas a debit card lets you spend just what's already in your bank account. A debit card definitely makes it more difficult for you to spend money you do not have.
Depending on how you see it, a credit card can be a handy tool, especially if there are big ticket items you need to purchase, such as a new laptop, TV, your bucket list trip halfway round the globe etc. On the other hand, a debit card will always remind you to spend within your means - an important mantra to live by regardless of whether you choose to use a debit card or a credit card.
In case you are new to the world of credit cards, know that there are different types of credit cards on the market - some let you earn rewards primarily, some help you get rid of debt, while others aim to help you build up your credit.
As we've briefly mentioned above, most credit cards let you get cash from the ATM but keep in mind this comes at a high cost - you are liable for the cash advance fee as well as cash advance APR the moment you perform the transaction at the ATM.
In general, credit cards come with an array of benefits such as fraud protection, free access to your credit score, extended warranties, and no foreign transaction fees. Every credit card is different, so check your credit card agreement for the exact benefits your credit card offers! Debit cards, on the contrary, are less generous when it comes to perks and benefits customers get to enjoy.
It is incredibly crucial that you always make it a point to pay your credit card bills in full by their due date to avoid incurring interest charges, late fees or even a penalty APR. When you use a credit card to make payments, your credit card company is expecting you to repay all the money you have borrowed, as well as any interest incurred, if any.
As an extension, making punctual, full payments will go a long way in helping you build up your credit history and credit score over time. Like it or not, the more responsible you are as a credit card user, the more robust and positive your credit history is going to be.
If you are trying to build up your credit history because you have a poor or limited credit history at the moment, responsible credit card use will come in handy as opposed to using a plain old debit card. Debit cards are not helpful when it comes to establishing credit history, and they often offer fewer protections for the consumer.
So, are credit cards better than debit cards? If you can manage your credit card well, use it responsibly and adopt the good habit of paying off your credit card bill in full punctually every month, credit cards can be very rewarding. However, if you know you are never going to be responsible with a credit card, opting for a debit card can be the smarter choice for you. At the very least, you know you can only spend what you have in your bank account, nothing more.