A debit credit card works the same as a regular credit card; the only exception is you are using your own money instead of borrowing from the bank. These cards are also referred to as a “prepaid credit cards”.
By loading a debit card with your money, any money you spend comes straight from your account. There’s no risk of accumulating interest on purchases because the money is your own.
Debit cards allow you to track your spending power better. Better still, you’ll never get into a situation with one where you are unable to make repayments. You also don’t have to worry about interest rates or credit checks, making for an easy application process. Whether you want to pay bills, shop and spend online or over the phone, debit cards can be an easy solution.
The downside of debit cards is that they’re a bare-bones product, so don’t expect certain benefits. For example, while some cards do have reward schemes, their ‘earn rate’ (i.e. the frequency you accumulate points) is quite low, comparative to regular credit cards. Be aware: debit cards won’t help improve your credit rating; you’ll need to apply for a standard credit card for that.
There are many benefits to getting a credit card. For one, you get to spend money that isn’t yours! This means if you’re eyeing off a big-ticket purchase, you don’t have to wait for payday. That said, unless you have interest free days and a 0% purchase rate, you may end up owing interest if don’t not pay it off each month.
You can use your prepaid credit card in all the same places as a traditional card, including online and at ATMs. Depending on the type of card you choose, you can also load it up with different currencies, which can be perfect for your trips abroad. Cards are protected by security chips and a PIN.
It depends. If you have an overdraft facility, you can access a line of credit if you exhaust the funds on your debit card. When this happens, you’ve ‘overdrawn’ your funds, and will start attracting interest on however much you go into debit. It’s expensive to use this facility, however, so you may be better off choosing a card without one.
These cards are ideal for all kinds of spending, are accepted in most locations, and are usually ‘reloadable’.
A travel debit card allows you to preload Australian dollars or a foreign currency for use when travelling overseas, saving on foreign currency withdrawals. Before employing this option on your next holiday, make sure the card is widely accepted at your destination.
Although you won’t be charged interest on a debit card, it’s still important to compare your options, as the following will vary between cards and lenders:
By understanding the spending limits available with your card, you can ensure your card is going to meet your financial needs. At Compare the Market, we make it easy for you to compare your prepaid credit card options.