Right, so now you have all these shiny cards from different banks in your wallet or purse, but the bank staff member is giving you confusing explanations and you feel very lost. What are all these thick plastic cards? What’s the difference between a credit and debit card? Which one do I use? How many do I need?

Well, in this article, we attempt to answer some of the common questions people have about credit and debit cards. Let’s begin with the most important question.

What is the difference between a Debit and Credit card?
The simplest way to define a debit card is that it’s a card that allows you to pay with money you already have in your bank account, whether it is a savings account or a checking account. On the other hand, when you use a credit card, you owe the bank whatever amount of money you spend. In essence, you are spending money you don’t have. The banks will then calculate all your credit spending and send you a bill at the end of the month. Banks usually charge an interest on your total spending as well.

Are there any similarities between credit and debit cards?
Well, first off, they both look very similar and both are swiped or slotted through special machines that can read them and charge amounts of money to them. Another similarity between them is that they are cashless methods to pay for products, and are great for people who don’t like bringing large amount of cash around. It is also safer when you need to pay a large amounts that can’t be paid by cash, such as for cars or for large electrical appliances.

What are the benefits of a Debit card?
Nowadays in Malaysia, usually when you sign up for a savings account and request an ATM card, the bank will provide you an ATM card that has multiple functions. One of these functions is as a debit card. In order to use a debit card, you will be required to enter a pin number and this is an added safety feature compared to Credit cards. Debit cards are also a good way for you to control spending as it only involves deducting whatever you spend from the balance in your bank account. There is also less headaches from Debit cards as you don’t have to pay the bill at the end of the month, and the banks do not impose any hidden or extra charge on its usage.

What are the benefits of Credit Cards?
The upside about having a Credit card is that you don’t need a bank account to get one. There is also more freedom to spend and you are not limited by how much you have in your account. However, do keep in mind that Credit card limits exist and these are determined by how much your monthly income is. The ability to obtain a credit card depends on your ‘Credit history’, which includes how many credit cards you’ve had in the past and how your bill payment habits were. If you were a responsible payee, you will find it easier to obtain more credit cards. However, if you were late on payments, you may find it harder to get credit cards or have cards with some very strict policies and conditions.

Credit cards often come with added bonuses when you use them, including things like promotional discounts, travel points, gift hampers and so on as part of many company’s promotional drive. This can help you save some costs in the long term, especially if you’re the type that likes to travel overseas.

So which one do I need?
This depend on what you earn and your own personality. If you don’t trust yourself and are afraid you may overspend, stick with the Debit card. However, if you earn enough and know that you can spend responsibly within your means, go ahead and apply for a Credit card.


(中文版请看这里:http://www.durianproperty.com.my/blog/article/1231)