Debit Card vs Credit Card | UOB Better TMRW

Better Tomorrow SME Hub Manage my money Debit Card vs Credit Card: What’s the Difference?

You are now reading:

Debit Card vs Credit Card: What’s the Difference?

Compare the two to find one that suits your needs. Read on to find out.

Oranges and apples are both fruits but they don’t taste the same. That applies to debit and credit cards too.

For starters, while both of these cards allow you to make quick and easy purchases, what makes them different is the money source from which each of these cards draw from.

Debit cards give you instant access to the funds in your bank account. That means, your spending ability is limited to the funds you currently have. On the flip side, credit cards allow you to pay with money that is “borrowed” from the bank that issued you your card. Your own funds will remain untouched until you’re billed at the end of the month for your credit card spending.

Still, all that is just the tip of the iceberg. Let’s dive deeper into the differences between the two.

Photo credits: CNA

The 4 Key Differences You Should Know

At a glance for Singaporeans and Permanent Residents:

	Debit Card	Credit Card
Card Application	Usually complimentary when you open an account with a bank Simpler sign-up requirements: • Qualify as long as you have a bank account, whether current or savings Applicable fees and charges: • Annual fee • Foreign currency transaction fee • Overseas cash withdrawal fee • Lost/Stolen card fee • Replacement fee • Sales Draft fee	Has to be applied for on your own accord Stricter sign-up requirements with provision of: • Latest payslips • Personal identification Applicable fees and charges: • Annual fee • Foreign currency transaction fee • International processing fee • Lost/Stolen card fee • Cash advance fee • Overlimit fee • Interest on purchases (where applicable) • Interest on cash advances • Additional interest • Minimum monthly payment • Late payment charges
Monetary Transactions	Money used for purchases is deducted from your savings or current account • Card is linked to your bank account so you pay for your own purchases	Money used for purchases is credit that is extended to you by the credit card issuer • Similar to a “short-term loan” Your credit card issuer may not necessarily be the same bank you use for your savings or current account You are required to pay back to the card issuer when your credit card statement/bill is issued • Delay in payment can result in fees incurred
Cash Access	Similar to an ATM card – you may withdraw cash via the ATM from your own savings or current account • No interest charged • No monthly limit (but daily limit may be applicable)	You can receive cash advances from the credit card issuer via the ATM • Cash advance fee and interest payable • Includes a monthly limit
Reward	Minimal, if not none	Extensive list of rewards. Types of reward can vary for different cards, but generally includes: • Cashback • Air miles • Points accumulation
Privileges (direct discount at merchant shops)	If under UOB, all debit cards have the same privileges as credit cards • If not, debit cards typically have minimal to no privileges	Indulge in dining, travel, retail and entertainment privileges with a range of merchant shops

Which is the Right Card for Me?

The one that complements your lifestyle and spending habits of course!

Are you a student who’s yet to be financially stable? Well then applying for a debit card might be a better option for you. Due to the nature of the card, you’ll be able to control your spending, plus save money on interest – a cost-effective way to make quick and easy purchases.

If you’re a working adult who has more spending power and is financially responsible, a credit card might be more suitable for you. Not only will you be able to earn rewards and benefit from the various privileges, you can also build a good credit score. This happens when you are a good “borrower” who pays your credit card bills in a timely fashion. To put it simply, the better credit score you have, the higher your chances in securing a bank loan.

So, have you decided on which card to get?

Credit and Citations:

Mark P. Cussen, Credit Card vs. Debit Cards: What’s the Difference? https://www.investopedia.com/articles/personal-finance/050214/credit-vs-debit-cards-which-better.asp

Deborah Gan, Debit Cards Versus Credit Cards in Singapore: Which Should You Use? https://www.singsaver.com.sg/blog/debit-cards-versus-credit-cards-in-singapore

Miriam Caldwell, What Is the Difference Between a Credit Card and a Debit Card? https://www.thebalance.com/difference-between-a-credit-card-and-a-debit-card-2385972

Disclaimer

We are providing you this financial literacy information (including any videos) (“Information) for your general information only. We do not intend for you to use the Information as accounting, legal, regulatory, tax, financial or any other type of advice. Before making any financial decisions, please speak with your own professional advisors on suitability. We make no representation or warranty as to the accuracy and completeness of the Information. We are not liable should you suffer any losses arising from your reliance on the Information.

Home

For Individuals

For Companies

About UOB

UOB Group Subsidiaries