Which Credit Card?

Bewildered by the sheer variety of debit cards and credit cards? Here is a breakdown of some of the main types of debit and credit cards available:

Debit card

You can use a debit card to buy goods and services. A debit card is very much like a cheque, unlike a credit card, you pay for goods straight away and the money comes out of your account quickly. The amount you spend using a debit card is immediately deducted from your current account.

A debit card allows you to make purchases whereby the money is taken straight from your current account, the benefit of a debit card is that your finances are kept up to date immediately, without having to wait for a monthly bill as is the case with a credit card.

Your banking institution issues you with a debit card. Debit cards offer less protection than credit cards in the event of a billing dispute. In addition, if your debit card is stolen, it is possible that your debit card account could be emptied. Most debit cards have a Switch/Delta/Solo/Electron symbol on them. If you become overdrawn you will pay interest on the amount due.

Cash card

This lets you take out money from a cash machine (ATM). To use it, you'll need a Personal Identification Number (or PIN) which your bank sends you. Each time you use your card at a cash machine, you'll need to key in this number.

Credit card

A credit card lets you buy goods and services up to a set limit before you pay for them. A credit card represents a loan agreement where you are offered credit, providing you pay off a minimum amount each month. You can charge purchases up to the amount of your credit limit and pay for them later.

If you clear your balance in full each month, you don't pay any interest on the money you have spent. But, if you don't, you'll normally have to pay at least 3-5% of the balance, and interest will be charged on the outstanding balance. Some cards charge you an annual fee.

A credit card allows you to live now and pay later. When you successfully apply for a credit card, you will be advised of your credit limit. Ensure you stay within it, as exceeding it could result in either your card taken away from you or being charged interest on the extra credit you incur.

Charge Card

This is very similar to a credit card, although the monthly balance must be paid in full. An example of a type of charge card would be an "American Express" card.

Cheque guarantee card

If you're paying for goods or services with a cheque, you'll probably be asked for a cheque guarantee card. This means the bank will normally pay your cheque up to the amount guaranteed.

Store Card

A restricted form of credit, store cards act as credit cards in those shops that the card is accepted. Purchases are made using the card, and then a consolidated bill is sent at the month's end, which is then settled in a manner similar to a credit card.

Deciding which plastic card to use can be confusing but it can help you to reach a decision if you know what you want to use the card for.

If you just need it as a substitute for carrying cash, rather than use a credit card, you may as well use a debit card, which takes the money from your bank account directly.

If you like to pay your balance off each month, a charge card might suit you.

If you want to pay off your debt in instalments, choose a credit card.

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