Debit Cards vs Credit Cards - Chalk and Cheese?

Credit cards are hugely popular these days, but take a moment to consider whether debit might trump credit.

Credit cards offer a convenient way to manage your cash flow and they are great for making payments. Over the past ten years banks have introduced new types of credit cards such as low rate and zero balance transfer offers, and the market has exploded with offers. The old ATM/eftpos card has also served many Australians perfectly well for doing basic banking tasks. But lately, CANNEX has seen a sharp rise in the popularity of debit cards amongst consumers.

A debit card is a card branded just like a credit card scheme, and currently these cards are available on both VISA and MasterCard. The product will be familiar to many credit union members as credit unions have offered debit cards for more than a decade. Now it seems that debit cards are hitting the mainstream. Recent figures show that 56% percent of Visa's global card sales volume was made on debit cards compared to 44% on credit cards.

Why the sudden fuss over debit cards?

So why the sudden rise in popularity? We see two main reasons at RateCity:

  • the limitations on ATM/eftpos cards are becoming more obvious; and
  • there are more and more debit cards on offer so they are more visible to consumers.

The main difference between an ATM/eftpos card and a debit card is whether the card is acceptable through internet and over the phone. Just like a credit card, a debit card will offer this flexibility and with increasing number of online transactions, it's certainly beginning to look more attractive for Australians that like to shop on the Internet.

In the last two years, two of four major banks started to offer debit cards as a standard option on their transaction accounts. This has opened consumer minds and like many Australians, you are probably exploring new features on your bank account as a result.

How to compare credit and debit cards

For those of you who are not eligible for a credit card, it is certainly an attractive option. If you do have the choice, here are things to consider:

Pros/Cons of Debit Cards & Credit Cards

  Debit Credit
Pros
  • Using your own money, so no temptation to get into debt and have to pay interest
  • No annual fee
  • Comes with interest free days, so if you pay off in time you will not get hit with interest expense
  • It is a loan that may help your cashflow
  • Extra features on some premium cards, such as rewards, concierge services, free travel insurance, extended warranty.
Cons
  • Lack of features compared to credit cards
  • Features come at a cost. Most credit cards charge an annual fee
  • When it is not used properly, may build a never ending debt

RateCity is the best website to shop around on for debit cards and credit cards. At RateCity, you can use expert comparative data from CANNEX, Australia's leading financial research and ratings firm. CANNEX has analysed and evaluated hundreds of credit cards to award five stars to only the very best. The CANNEX star ratings go much further than just looking at interest rates. They also take into account important features so you can be confident you are getting the best product. If you are looking for debit cards search RateCity's transaction accounts and you will find the accounts that allow you to use a debit card facility.

Use our easy search tools to compare savings accounts at RateCity.
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