Anyone with a bank account has different ways to pay for their goods and services. While they may decide to use cash for transactions that do not require a large amount, the credit and debit cards are other convenient means of payment.
A credit card gives you access to a credit facility in your bank, which can be used for your daily expenses both locally and abroad. However, you will be charged some fees for enjoying this facility. You may be required to open a domiciliary account to have a credit card. It is usually denominated in dollars, but can also be used to settle purchases in other major currencies. It can be used to withdraw cash from the Automated Teller Machine.
Debit cards are used to make payments in shopping malls and to withdraw cash from the ATM. The money is automatically taken from your bank account and you cannot spend above what you have in his account.
You probably have at least one credit card and one debit card in your wallet. The convenience and protection that they offer are hard to beat in many instances, but they have important differences that could substantially affect your pocketbook, according to a report by investopedia.com.
Credit and debit cards typically look almost identical, with 16-digit card numbers, expiration dates and PIN codes. But that is where the similarity ends. Debit cards allow bank customers to spend money that they have by drawing on funds that they deposited with the card provider.
Credit cards allow consumers to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash.
A debit card draws on money the user already has while credit cards are issued as standard cards, which simply extend a line of credit to its users.
At any given store or retailer, a buyer can generally choose between credit cards, debit cards, and cash. Another report by businessinsider.com, explains when the different payment options are applicable.
Credit borrows money from the bank, with the promise to pay back at the end of the month or pay a fee in the form of interest. Debit pulls electronic cash straight from the bank account. Cash starts and ends the transaction in plain sight at the register, when the notes (paper) and coins will be handed out. Which means of payment you should use depends on your situation.
Why online shoppers should use credit
A major recommended option for online shoppers is credit. That is because, aside from the fact that you can’t exactly hand a website a stack of N2,000 bills; credit cards provide more purchase and fraud protection than debit cards. Knowing that most online information may be subject to hackers, a little protection is a good thing.
Why patrons of small businesses should use debit
Using debit when making a small purchase at a small business may seem arbitrary, but it actually costs small business owners more to process a credit transaction than a debit card or cash.
Why you shouldn’t use money on your credit card
Just because a credit card allows you to spend a certain amount of money doesn’t mean you should use every money in it. It is always a good idea to leave a little space on your card in case there is an urgent, unexpected need.
Why few people should use cash
You will also notice that there is only a very specific set of circumstances in which it is recommended to use cash.
Specifically, when you have no other viable options. While some people love cash because it is emotionally harder to part with it than it is to hand over a card, in the grand scheme of things, credit and debit are usually better options.
Tha is because both methods keep an electronic record of your purchases, allowing you to more easily track your spending, see where your money goes, and even stick to a budget. You can hook both cards up to an app and have all of your transactions categorised, sorted, and plugged into your budget.
If you are in a store planning to use a card and see a “cash only” sign or one with a N1,000 credit card minimum for your N500 purchase, your decision is made for you.