Understanding payment cards: credit and debit

Maximizing the benefits of your debit and credit cards

08:15 08 October 2013

You may have been working for a long time or just starting to work your way up the professional ladder.  Regardless of the duration of your career so far, if you have not paid attention to organizing your finances, now is the right time to start by beginning to look at the payment methods you can use on your purchases.

Next to cash payments, two of the more popular methods of payment are through the debit card and the credit card.

The debit card is connected to your current account and can be accessed electronically.  The debit card can be used for almost all types of purchases such as gasoline, restaurants, and shops, among others.  Since you are you using your own money you should make sure it is sufficiently funded for your purchases.  If you do not have enough money to pay for a purchase, you can arrange for an overdraft privilege but avoid going to that zone because that will incur you charges.

The credit card has similar functions as the debit card in which it could be used to pay for purchases made.  However, the similarity stops there because unlike debit cards where you spend your own money, the credit card is funded by the bank issuing the card. Purchases made through the credit card carries purchase protection coverage so that if they are damaged or defective, they can be changed.  Payment for purchases or services acquired are advanced by the credit card but will have to be settled in full come due date to avoid paying interest. If you opt to pay in instalments, then you will have to pay the corresponding financing charges, unless goods or services bought come with a zero interest scheme.

Purchases using the credit card come with rewards, points or even air miles.  Just remember that best way to maximize the benefits of a credit card is always to pay in full and on time thus, you get the points and rewards without suffering from the high refinancing interest charges.