Both debit and credit cards have their benefits and disadvantages depending on the personal spending habits and lifestyle of the cardholder. But before deciding on one card type over another, let’s shed some light on the pros and cons of debit cards and credit cards.

Debit Card Rewards And Limits

Debit cards are loaded with your own money and can be used in most places where credit cards are accepted. Issued through Visa or MasterCard, the main difference between a debit card and a credit card is that you do not have to worry about debts and interest rates.

Debit cards are also available for people under 18 years of age, which means more financial freedom (or responsibility) can be given to young people.

Many debit cards include features such as:

• No, or low monthly fees
• No fees for using the card overseas
• Reduced or waived ATM fees
• Unlimited transactions

A number of debit card rewards are beginning to show up as well, like the NAB Gold Visa Debit card, which has a range of complimentary insurance offers for cardholders, or the ANZ Access Advantage Visa Debit card, which provides exclusive entertainment offers from Visa.

The features that come with debit cards make them ideal for people under 18, travellers and the financially frugal. No credit history is needed for a debit card either.

While debit cards can be considered the “safer” option because you are spending your own money and not relying on credit, it does mean you are limited by what funds you have available. If you have not put enough money into the debit account you may be limited at a time when you want to use it.

Credit Card Offers And Restrictions

A credit card provides access to funds at any time, regardless of how long it is til payday. They give you a set credit limit to work with and allow you to pay it back in regular instalments.

Credit cards are one of the most popular financial services in Australia, with the Reserve Bank of Australia reporting more than 13 million cards currently active. Greater financial freedom, competitive rewards programs and the sheer convenience of credit cards can make them an asset to many people.

When repayments are well managed credit cards are a safe financial option, and there is a range of card types to help make payments easy including low fees, low interest, balance transfer and rewards.

However, there are some disadvantages to credit cards, including:

• Higher interest rates than other forms of money lending
• Greater risk of debt; and
• More costs and fees for features

When it comes to deciding between debit and credit cards, looking at the pros and cons is a vital part of the process. The important thing is to understand how each card works so that you can use it conveniently without overspending.