Should you use a debit card or a credit card

6 min readFeb 6, 2020

Hello everyone and welcome back to my success series. In today’s blog, I’ll share my experience with credit cards and give you my take on their ups and downs. If you happen to be new to my blog or are unfamiliar with the subject, I’d highly recommend that you start with my first blog in the series — I’ll leave a link in the resource section down below!

I had my first encounter with credit and debit cards when I first arrived in London. After a few years I realised that running a business requires using credit cards. As my mortgage advisor pointed out, as convenient as debit cards might seem, you simply need a credit card if you are to build up your credit score.

But this doesn’t mean that you can go on careless spending sprees! Quite the opposite — you need to be very careful with your spending. I’ve always been cautious with my credit cards; I’ve always paid on time, and my highest penalty so far has been £12. Sometimes you’re just too busy and too distracted by work to pay proper attention, and it’s really easy to get carried away. I’ve got a Tesco card, which I love using because of their excellent Virgin miles program. This has provided me with few first-class tickets. A lot of companies also offer cashback alternatives.

The main difference between Debit and Credit Cards

In essence, both debit and credit cards serve the same purpose — they allow you to quickly and easily make purchases and payments without having to carry cash. The main difference between the two is where the money comes from. Debit cards are issued by banks and take funds directly out of your bank account. Credit cards, on the other hand, are supplied by third party companies which charge it to your line of credit.

Debit Cards

Debit cards allow you to withdraw money from ATM devices or stores by using a specific PIN code. Additionally, most stores also support PIN-less transactions, facilitating an easier and more streamlined experience.

Since debit cards withdraw money directly from your current account, this generally means that you need to have the money first before you are allowed to spend it. And while some banks offer overdraft schemes, you will have a much harder time spending funds that you don’t have. In other words, debit cards are suitable for people who aren’t great at managing their finances or are prone to overspending.

How debit cards function

When you pay for a product or service using your debit card, your funds are temporarily put on hold, while the merchant’s bank processes your payment. The process is usually quick, but sometimes delays can happen, resulting in the hold off expiring before the transaction’s completion.

Debit Card Pros and Cons

Debit Card Pros

It’s very difficult to go into debt using a debit card — unless you’ve got an overdraft program, you’re not going to be able to spend more than you have.
It’s very simple to get a debit card — if you have a bank account, the chances are that you already have a debit card.
Debit cards are easy to use –unlike credit cards, debit cards are much simpler to use.

Debit card cons

Debit cards are directly linked to your bank account — if your card details get stolen, your account is likely going to be at risk.
Debit card disputes can be difficult to settle — debit card disputes are much more difficult to settle, as you’re dealing directly with your bank.
There’s no “debit score” — unlike credit cards, a debit card doesn’t come with long-term benefits down the line.

Credit Cards

Credit Cards allow you to complete transactions, as well as pay for products and services. They can be used to complete basic transactions both online and in physical stores, purchase items, or invest in a variety of goods.

How Credit Cards Function

Unlike debit, Credit Cards don’t require you to have the money in your account before you spend it. When using a Credit Card, you are essentially making a transaction by borrowing funds from your credit card company, which you or they (ideally) repay by the end of the month. Despite this, they don’t provide you with unlimited purchasing power. Quite the contrary — each credit card contract features a certain limit that you’re unable to exceed.

Just like debit cards, credit card companies will charge you a nominal fee for using their service. On top of that, if you fail to pay back the balance by the end of the month, you will be charged interest. Credit card interest rates tend to be rather high and so I’d highly advise you to stay on top of your payments. Additionally, failing to clear your balance is guaranteed to hurt your credit score and should be avoided at all costs if you plan on using your credit card for serious purchases or investments.

Credit Card Pros and Cons:

Credit Card Pros

Credit cards allow you to build a credit score — if you plan on using large sums of money in the foreseeable future, you definitely want a solid credit score
Credit cards often come with additional benefit programs — some companies offer cashback, others offer with flight tickets.
Credit cards are convenient — when you’re looking to make a big purchase, a credit card backed up by a solid credit score is your best bet.
Unexpected expenses and emergencies — when the unexpected happens, you can always fall back on your credit card. Just remember to pay back in time.

Credit Card Cons

Being late can hurt your credit score — if you don’t manage to stay on top of your payments, your credit score is going to take a hit.
Interest and fees — just like debit cards, credit cards come with their own fees for using the service. On top of that, however, delaying your payments will incur interest that you’ll need to pay off.
It’s easier to spend more than you can afford — if you’re not good at managing your finances, a credit card can make things much easier to control

In closing

If you’ve been following my series about financial freedom, you already know the importance of keeping a good credit score and getting rid of any debt that you might’ve accumulated. Assuming that you’ve already done so, and are looking to start a business or make any sort of large investments or purchases, credit cards are the way to go.

However, if you happen to be struggling with your budgeting and are prone to overspending, you might want to stick to debit or even cash until you feel like you’re in the clear.

Personally, I’ve been using credit cards for many years, and I’m delighted with the flexibility and quality of service.

And what about you? What is your experience with credit cards? Do you use them, or are you more of a Debit Card-kind-of-person? What are your most and least favourite things about the credit system? Leave me your thoughts, opinions and experiences in the comments below — I always love hearing from you!

Thank you all for reading and I’ll see you next time!

Stay green and motivated!

RESOURCES:

Useful books you can read to find out more about the world of finance: