Debit or credit card?

Debit cards are often considered better than credit cards because you’re using your own money and you can’t get into debt as with a credit card. But if you’re sensible with your spending, credit cards may be a better option than debit.

Grace period

If you pay your credit card balance in full each month you will not be charged any interest, and the money will stay in your bank account until payment is required. This is useful if you have an offset account linked to a loan account, as you will also save on interested charged on this account. Using a debit card will withdraw the money from your account immediately, meaning you do not get the benefit of reducing interest on your linked loan account.

Purchase protections

If you make a purchase on your debit card and there is a problem with the purchase on the transaction processing, then it’s often difficult to dispute the transaction, as the money has already been taken from your account. Credit cards not only offer a clear dispute process, many also offer purchase insurance should an item be faulty. If you’re making a major purchase, it’s often better to do so on a credit card for these reasons.

Unauthorised transactions

If your debit card is lost or stolen and someone is able to access your account, then you may lose a considerable amount of money before being able to claim it back. Losses on your credit card are more easily rectified and don’t usually result in money being taken from your current or savings account.

Processing disputed transactions

Although a transaction from a debit card is processed immediately, any refund for a disputed transaction, or indeed, from simply returning goods, may take a few days or more to be returned to your account. If you’re managing on a tight budget, it may be inconvenient for you to wait for this money to be returned. While credit card transactions can also take a few days to be refunded, this is less likely to stop you from accessing your own money.

Fee and charges

Many cards, be they debit or credit, are issued as part of a bank account and as a result, the fees are included in account charges. However, some cards will incur additional fees depending on how they are used. Before you use your card, you should be clear on any fees you will be charged.

For more information on credit and debit cards, visit Moneysmart.gov.au

Written by Debbie McTaggart



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