I have never owned a credit card. Despite credit card companies having great promotions, I felt that it was simply a gimmick to go down the slippery slope. I personally saw how close friends (educated poor) raked up over tens of thousands of debts because of these shiny cards. My Telegram channel where I share one financial tip a day also know I shut this off totally.
Until 2021, this year I applied for my first credit card while doing research on how to save on big ticket purchases.
So what changed? I want to share a new perspective of what I learnt this year and hope this can somehow change your news on these cards in our wallets.
What is a Credit or Debit Card?
Both credit and debit cards have made it easier and more convenient to do purchases whether it is online of in stores. There is one key difference.
Credit Cards: It allows you to borrow money from the card issuer up to a certain limit to purchase an item or withdraw cash.
Debit Cards: It allows you to draw money that you have deposited in the bank.
Basically, credit card uses other people’s money and a debit card uses your money.
I want to draw on 3 points for you to consider before you make a decision for yourself.
Do you have spending issues? Trust me, I met people who have and they were the ones who encouraged me to write The Ultimate 4 Quadrants Shopping Guide. They have been using it like a bible since then. I do think it is important to know and accept what kind person we are. It is only with this knowledge and acceptance that can allow us to create a solution for you.
Often, I see people who denies or dismiss their true self makes their debts even worse.
For people who have spending issues, get a Debit Card.
If you are well disciplined with your finances, you may explore what benefits Credit Cards have. Some offers cashbacks while others offers miles. Some might give you a luggage or even upfront cash when you sign up! This is quite straight-forward.
It is a hands down win for Credit Card here. The only thing you have to make sure is to pay it all up before your interest comes in.
I truly appreciate this a few years ago when I received an SMS from OCBC saying that $3000 has been deducted from my debit card. This message was received when I was in office attending a training and I don’t have any transaction of that size. I logged into to my OCBC account to verify and indeed the amount was deducted. To tell you the truth, I felt nausea when I received the sms.
I have long lost that SMS but I have found something similar from Stomp.
I immediately dialed for OCBC. For what felt like decades (for those of you who have called the bank before, you would know how long it took), a customer service representative replied. I appreciated the representative was clear and calm. He advised some paperwork, asked me to dispose of my current debit card and arranged a new one to arrive in a few working days.
However, he was hesitant when I asked when I will receive the $3000 back. He mentioned the bank will do the appropriate investigation and will take a few weeks before the amount will be back in my bank again.
Eventually, I did get my $3000 back in my account. It took slightly lesser than 2 weeks. However, I felt worried all the time.
Credit cards on the other hand, serves as a border between your personal money and the transaction. In an event of an identify theft or stolen card, it will be less stressful as it is technically not your money. I never truly appreciated the value of Credit cards until this happened.
I have 1 credit card which I used mainly for my transactions. I reap some benefits by getting cashbacks from my transaction and yes, I do make sure I pay on time.
Which will you choose? Credit cards or debit cards? Let me know in the comments below.
Chengkok is a licensed Financial Services Consultant since 2012. He is an Investment and Critical Illness Specialist. Wealthdojo was created in 2019 to educate and debunk “free financial advice” that was given without context.
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The views and opinions expressed in this publication are those of the author and do not reflect the official policy or position of any other agency, organisation, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author.