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Debit Card vs. Credit Card: When to Use Each Type of Payment Card

Apr 15, 2021 6:46:00 PM

Nowadays, it’s easier than ever to shop and pay your bills using a variety of payment methods. Admittedly, cash is still king for millions of Filipinos. However, alternative cashless solutions such as e-wallets like PayMaya, debit cards, and credit cards, are slowly but surely gaining ground.

Debit and credit cards are arguably the most popular alternatives to cash in the Philippines. In fact, there are those who own two or even three of each kind of card. For unbanked customers or those who like alternatives to traditional banking cards, there are physical cards that you can link to your e-wallet that can function as a debit card. (There are also virtual cards that can act like a debit card for your online purchases.)

Using debit and credit cards each has its pros and cons. That’s why the question you need to answer isn’t “which one is the best?” but rather “when should I use a debit or credit card?” Below, we offer a quick guide

When You Want to Control Your Spending: Debit Card

The main difference between a debit card and a credit card is that a credit card allows you to spend money that you don’t have yet. Essentially, you’re taking out a pre-approved loan. With a debit card, you can only spend the money that’s already in your account.

This means that if you want a better handle on your finances, it’s better to use your debit card. Obviously, using a credit card doesn’t immediately mean that you’re going to fall into debt. However, it’s also true that it’s easier to spend beyond your means with a credit card.

If you notice warning signs of debt trouble, switch to using your debit card. Resume using your credit card only if you have already developed better money management habits.

When You’re Buying from Small Businesses: Debit Card

It's a good thing to support small businesses. It's even better if you support them by using your debit card to pay for your purchases. Why? This is because there are fees that entrepreneurs need to pay for credit card transactions. This can have an effect on their prices, not to mention their profits.

When you use your debit card, however, there are little to no processing fees required. Sellers can also receive their money faster when you pay using your debit card.

When You Want to Earn Points: Credit Card

One of the pros of using a credit card is that you can enjoy plenty of perks and bonuses each time you use it. You can earn airline miles, loyalty points, fuel credits, cashback rewards, and more, depending on the amount of your purchase and the type of your card. Some credit cards may even offer extended warranties on appliances or hotel room upgrades!

You can also earn points or receive gift vouchers when you successfully invite friends to sign up for the same credit card (and they get approved). Just make sure to read the terms and conditions of your credit card, as well as the fine print of the offers and promos. You might be surprised at how many perks you can experience with your credit card.

When You Want to Establish Good Credit History: Credit Card

Are you planning to take out a big loan in the future? Then you better establish a good credit history ASAP. One way to do this is to use your credit card often and responsibly. Doing so can help improve your credit scores, and thus prove to lending institutions that you are capable of paying a loan.

The operative word, of course, is “responsibly.” Make sure to pay your bills on time and pay in full (or pay more than the minimum) to make a good impression. If you fail to settle your dues, it will incur higher and higher interests, which affects both your spending power and your credit score.

When You’re Buying from Foreign Shops: Credit Card

Sometimes, there are products that aren’t available locally and your only option is to order things from abroad. If you’re online shopping from foreign sellers, it’s best to use your credit card. This way, you have better protection against fraud. It’s also easier to monitor your transactions.

It’s also important to note that many online shops only allow overseas purchases made using credit cards. In short, you really can’t proceed if you don’t use your credit card.

When You’re Traveling Abroad: Credit Card

When you’re traveling abroad, it’s also a good idea to use your credit card to enjoy tax-free purchases and other perks. Many establishments also only accept credit cards (or cash), which means just like foreign online purchases, you may have no choice but to swipe.

To balance out your spending, reserve your pocket money for establishments that are cash-exclusive such as street food vendors or quirky souvenir shops. For the rest, use your credit card and rack up the points while you’re at it.

Again, there’s no “real” better choice between a debit or a credit card. It all depends on the circumstances and your personal money habits.

Happy shopping!