Should you use a debit card or a credit card

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

Debit Cards

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

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

How Credit Cards Function

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 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

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!


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

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