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Writer's pictureChloe Tay

Debit Cards and Credit Cards – Same same but different?

A card is a card is a card. Or isit?


What is a debit card?

A debit card allows us to use only the money that we have in our bank account. This includes ATM withdrawals, NETS transactions, and contactless payments via visa/mastercard.


What is a credit card?

A credit card allows us to spend up to the pre-set monthly limit (usually 2x of our monthly income), and pay later. Think of it as using the bank’s money to pay for purchases first and then repaying the bank afterwards when we receive our monthly statement. Unlike debit cards which require only an account with the bank, credit card applications are stricter, and factor in our annual income, credit scores and any outstanding debts.


How are they similar?

Both debit and credit cards are similar in some ways.


#1: Both cards have 16-digit card numbers, expiration dates, magnetic strips and EMV chips.

#2: Both cards allow for contactless payments/visa/mastercard transactions online and offline.

#3: Both cards have monthly statements for our reference.


How are they different?

Although both cards offer some similarities, they have far greater differences.

#1: Credit cards offer more perks than debit cards

They offer us the option to clock and earn miles/cashback for our purchases, ranging

from 1% to as high as 6%. Apart from that, many banks’ credit cards also give discounts/

vouchers on purchases/dining at selected stores that they tie up with.


#2: Credit cards tend to be safer than debit cards^4

Receive sms/email notification, temporary holding of transaction pending call back.


#3: Credit cards offer interest-free instalment plans

Majority of credit card providers allow for interest free instalment plans when you shop in stores with min purchase.


For e.g. Best Denki offers 6, 12 or 24 months 0% interest instalment plans for payments made using OCBC or UOB credit cards with a min spend of $500 and above. ^5


#4: We can end up owing money on credit cards ^6

If we can’t pay off the full amount at the end of a billing cycle, that means we now owe the bank money. We will then be charged an interest until we pay them back.


Assume the bank charges 27.78% p.a. for outstanding amounts. If you owe $500 on your credit card, your interest will come up to $11.56, which means you now owe the bank $511.56. And if you fail to repay by the next payment due date, a higher interest rate

of 30.78% will apply to all new outstanding. ^7


So, which is right for me?

To use a debit card or credit card depends on our lifestyle habits and discipline. Here are some points to consider before deciding.

  • Are you a Frugalist or Spendthrift? ^8

If you are a frugalist, perhaps you can do with just a debit card. And if you are a spendthrift,

credit cards offer rewards and cashbacks.

  • Time management

Late repayment for credit cards will incur high interest charges.

Possible solution: Set up giro arrangement so that the monthly bill will be automatically paid.

  • Do you have any Self-control?

If we are ill-disciplined with self-control, we can end up spending a lot more than we lanned to with credit cards.

Possible solutions:

- Set a lower monthly limit on your credit card. E.g. $1,000

- Use a debit card instead.

- Leave your credit card at home. Use it only for big ticket purchases such as air tickets and accommodations, and/or for regular bills such as your hp bill, insurance premiums, monthly subscriptions.


As with most other things in life, a credit card is a double-edged sword. It can be a great gateway to amazing perks (e.g. free air tickets from points earned), or a one-way ticket to financial hell. So if you ever want to seek more advice from Chloe first, she is always a text away.

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