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Credit Card Or Debit Card: Which Is Better?

Know the difference before applying for one.


For the longest time, Visa and Mastercards only came in the form of credit cards. However, with the introduction of debit cards in recent years, more and more people are starting to rely on debit cards instead of credit cards.

While both credit and debit cards largely look the same in terms of appearance and can perform most of the same functions such as online and over-the-counter transactions, there exists some fundamental differences between the two that might influence the choices consumers make and how they might use them.

The Main Difference

As their name suggests, the main difference between a credit card and a debit card lies in the nature of the transaction performed when a user uses their card.

Read Also: 11 Things To Look Out For When Buying A Property

Credit Limit Vs Existing Cash

When a user uses their credit card, money is transferred to the merchant from the line of credit extended to the cardholder. In other words, the bank is lending the cardholder money for the transaction.

On the other hand, when a user uses their debit card, money is transferred to the merchant from the cardholder’s banking account that’s linked to the debit card. The transaction amount will then be deducted from the cardholder’s available bank balance.

Also, a credit card holder can spend as much as their credit limit allow whereas a debit card holder can only spend as much as the remaining balance left in their linked banking account.

Points, Discounts And Rewards

Credit card holders also tend to enjoy better discounts at partnering outlets and a better points and rewards system.

Banks and card-issuers stand to make more from the hefty interest credit card holders would have to pay if they missed their monthly repayments or decide to accumulate their credit card debts.

Annual Fees

Credit card holders are also required to pay an annual fee for the use of the card. The annual fee charged by banks would vary depending on the type and prestige of the credit card in question.

Pros And Cons

At a glance, credit cards seem to offer more perks and benefits but might come at a higher cost should cardholders fail to pay their bills on time and let their credit card debt accumulate.

In serious cases, a heavy credit card debt can hurt a person’s credit rating or even lead to bankruptcy. After all, credit card debt is one of the leading causes of personal bankruptcy in Malaysia.

On the other hand, debit cards don’t come with as many perks and benefits as credit cards but offer a simpler and more frugal way for cardholders to spend and manage their expenses, knowing that they can’t spend more than the amount of money they put in their banking accounts each month and not having to worry about missing monthly payments or having to service a mountain of credit card debt.

Making The Best Use Of Both

As financially savvy individuals, we should learn to take advantage of the features of both credit and debit cards to our greatest advantage.

For big-spenders, spending using a credit card can result in substantial savings and rewards in the form of discounts, cash backs and reward points.

Self-Discipline And Financial Planning

As long as credit card holders are disciplined enough to not overspend and miss any monthly payments so they won’t have to pay the hefty interests charged by banks, spending through credit cards can actually result in substantial savings.

However, for individuals who aren’t disciplined enough to not overspend or pay their credit card bills on time, it might be better to just stick with debit cards.

In the end, it’s all about having self-discipline and making wise financial decisions.

Read Also: What Can Banks Do If You Don’t Pay Up?

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