Which card is better? Credit, debit or charge card?
Plastic cards have become an important part of any first-world economy and they have their place and are here to stay. We might as well try to understand them and how you’d choose. You’ll find hundreds on the market – the problem is finding the most suitable card.
Credit Cards
Credit card can be broken down into two broad categories:
1. Those with no interest-free days
2. Those with interest-free days
Typically, cards with no interest-free days won’t hit you hard with fees and generally charge a lower interest rate. With cards offering interest-free days, reward programs are usually thrown in for good measures. But the trade-off is higher interest payment plus higher annual fees.
Debit Cards
Unlike a credit card, a debit card will typically compel you to use your own money rather than then lender’s funds. Debit cards are attached to a saving account so this mean you cannot spend more than what you have in your saving account.
Charge Cards
Charge cards like American Express, Diners Club and Citi Bank usually attract those looking for convenience of a card who can pay the full amount each month. Charge card won’t have an upper limit (unlike a credit card), however failure to pay the full amount by the due date and there’s a stiff penalty. Charge card may also offer reward schemes such as spend a dollar and receive an award point.
The choice of which card really depends on your lifestyle and what you can commit to. If you are religious about paying your card before the payment due date, then a credit card with interest-free days it probably the best one for you. Make sure you shop for the best interest-free days credit card with low annual fees.
If you’re a student, tight on budget or just cannot control your spending, then a debit card is probably what you need. This is because the debit card won’t let you spend more than what you saved, while still giving you the flexibility of a credit card while paying relatively minimal fees.
Finally don’t discount the charge cards such as American Express, Diners Club and Citi Bank. These cards offer benefits such as extended warranties on electrical goods purchased with the card, 24-hour replacement of lost or stolen cards and access to your own funds should you run into problems using foreign ATMs, great for when you’re travelling overseas.