Debit Cards vs Credit Cards

Visa and Mastercard Debit Cards are becoming more popular. With adcampaigns like "spend your own money" and the misconception that because the card spends your own money you're safer, who wouldn't get on board?

But I ask you to take a real look at what the Debit Card is, and why you want a Credit Card instead.

Credit Cards are Safer.
Credit cards and debit cards are equally as easy to fraud. Once you have the card number buying something online with a fraudulent card is easy, just type in the number and away you go. There is nothing safer about having a debit card.

In fact having a credit card is safer. If someone uses your debit card to buy a $5,000 flat screen TV, that money will come straight out of your bank account, goodbye food for the next week or so. Sure you can apply to your card issuer to return the money because it was stolen, but that still takes time. If this happened with a credit card, the money would never come out of your account, as your card issuer could reverse the transaction easily before you have to pay for it.

Credit Cards Save You Money
Do you have a home loan with an offset account? Or an internet-only linked high interest account you can keep your money in? If you have either, you can make purchases on 55-day interest free credit card (all banks have one) putting the money you save into an offset account for your home loan, or into a high interest bank account. You'll easily make an extra $100 to $300 a year doing this, and if you have the home loan it'll save you that much off your interest!

But what about the idea: Credit Cards will make me spend too much money...
At the end of the day having a credit card won't make you spend anymore money than you would with a debit card. You just need some self control. It is possible to use a credit card only for purchases that you intend to payoff in full when the statement arrives, and as I've outlined above it's a heck of an advantage over the Debit card.

Unless you have a poor credit rating, or for some other reason are unable to acquire a Credit Card, there's no reason you shouldn't be using one instead of the deceiving Debit Cards that are becoming oh-so-popular. The key is to use a Credit Card like a Debit Card, only spend the money you already have and even set it aside as you use your Credit Card.

Note: If you can't control your spending, you should probably limit your access to money in any form that detaches you from how much money you really have.

I came across this today (25/11/2009), a visual and well done presentation on the pros and cons of both Credit Cards and Debit Cards, as well as an outline to the real physical risks of using a Debit Card.