In recent decades, as banks encourage people to spend money, the use of debit and credit cards has increased dramatically. Both credit and debit cards are handy when making transactions. However, as debit cards draw funds from your own account, you will not be able to establish your credit score.
On the other hand, if you use your credit cards wisely and pay your bills on time, it will be beneficial to you in the future. For example, you will not have trouble borrowing money from lenders to meet your personal needs.
Let us take a look at some additional reasons why you should opt for credit cards on debit cards:
You can easily handle emergency situations
If you need money urgently, for example, to make alternative transportation arrangements, a credit card is a much better tool instead of taking out money from your personal savings . With a credit card, you will be able to make emergency purchases on credit first. You can repay the borrowed amount later at your convenience. Young professionals who have just started making money, multiple credit cards allow them to immediately access a large pool of funds. This is ideal as long as they can handle these credit cards well.
You will improve your credit score
If you make constant payments using your credit card, you can easily improve your credit score. With debit cards, you will not be able to make a difference on your credit score because this equates to issuing a check, which has no effect on your credit score since the money is drawn from your account. With a good credit score, you can easily take loans in the future, such as for a car or a home.
Collect Reward and Cashback Points
With most credit cards, you will probably get rewards for some purchases. This is one way that card companies are encouraging users to spend more, but if you pay attention, you can make the most of these reward points. Some common rewards include cash back programs, airline miles, promotional services, hotel credits, and a fuel reduction. Other cards provide points that you can accumulate and use for your future purchases.
You'll get interest-free loans
With most credit cards, interest is charged only on the outstanding balance after the due date of payment. If you do not pay the full bill before this due date, you will pay a huge interest on outstanding balances, which is normally close to 24% to 28% pa However, if you plan carefully and you spend cautiously, you will not have to worry about interest because you will benefit from an interest free period for your purchases. You will receive a credit at no extra charge.
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You will get immense buying power
With credit cards, you will be able to make a big purchase, such as a payment on a kitchen appliance, or book airline tickets. Big purchases can bring you big rewards too. If you are responsible, you will get an improved credit score and a higher credit limit, if you are at the hour with the payment of your bill.
A credit card is safer than a debit card
Since a debit card deducted money from your account at the time of the transaction, it is very important that your card be protected against any fraudulent transaction. With a credit card, you can simply report fraud by making a phone call and you will not have to pay for any charges not made by you. Your credit is secure and intact.
On the other hand, with a debit card, you will be in a very bad situation. Your money in the account would have disappeared. The obligation would be on you to raise this issue with the bank and get a refund.
The biggest test for card issuers has been to offer the most useful features on their cards to customers. Cardholders clearly reap the benefits, as there are nearly 8 million credit cards used by Singaporeans.