Both credit, debit cards have a place in your financial toolkit

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"Credit and debit cards enjoy the same status when it comes to paying for goods and services, and they are recognised almost anywhere in the world," says Vinolan David, head of card issuing at Standard Bank.

"The major difference between them is that a debit card is linked to your current account and a credit card is essentially a line of credit."

Credit cards allow consumers to borrow money from the card issuer up to a pre-approved limit. Debit cards on the other hand, allow individuals to spend money that they have deposited in their bank accounts or against their overdrafts on their current accounts.

Flexibility of a card

"A debit card is a great tool for people who need the flexibility of a card, but do not feel that they have the discipline to run a credit card or earn enough to qualify for one," David says. "The only limitation of a debit card is that sometimes it is not accepted as a form of payment at some hotels or car rental agencies, so it is important to check when making a booking."

A credit card operates in the same manner as a debit card, but instead of taking the money from your current account, you borrow money from the bank every time you use the card. The credit card issuer will charge interest on the used balance of your credit line, however, if you settle the full balance within 55 days you will not be charged. It must be noted that some types of transactions undertaken on a credit card incur interest from the date of the transaction e.g. cash withdrawals.

"Other benefits of credit cards include free basic travel insurance, free online shopping and, by using your card responsibly, you can build up a good credit score," David says. So do you need both types of cards? According to David, having both cards will certainly assist in managing finances.

Keeping tabs

"Using a debit card allows you to 'pay now' for your daily transactions and is safer and more convenient than carrying cash. It also gives you a record of your spending, because everything is recorded on your statement and on your internet banking. Keeping tabs on your current account is an important element of budgeting.
Using a credit card allows you to 'pay later' and can assist in purchasing products or services, where cash isn't immediately available on hand, thus allowing the consumer to pay back at a later stage. Credit cards can also be extremely useful in an emergency situation."

The trick is to balance the two so you always stay in control of your finances. When using both cards, try to be aware of wants and needs to make sure you are not spending just because you can.

"While credit and debit cards offer extraordinary convenience and are safer than cash, you need to proceed with caution when using them. Never let your card out of your sight and be cautious when entering your PIN. Cloning and theft are a reality, but if you're cautious, these tools will add much value to and facilitate your daily banking processes with no problems," David concludes.