Paying by credit versus debit


THERE are big differences between paying with a debit card rather than a credit card.

The main one being the big hole the latter can leave in your finances.

Using a debit card means you are using your own cash, while paying by credit card means you are spending money that is not yours.

Crown Money Management founder Scott Parry says credit cards are nothing more than “financial quicksand”.

“It’s very hard to be conscious of your spending when you spend on credit because your mindset is that you’re not at your limit and you can afford it,’’ he says.

“But when you’re using a debit card it’s different; you might be thinking you have $500 to last until Monday and what do you need as opposed to having $5000 available on your credit card and what do you want.”

Parry says you should be able to manage money without the need to rely on having a credit card to pay.


“There’s no real need, there’s nothing you can’t do on a debit card that you can do on a credit card,’’ he says.

“The only argument we get from our clients is that credit cards are good for points but these days you have to spend $300,000 to get a kettle on frequent flyer points.”

Data from financial comparison site shows credit card card interest rates range anywhere from eight per cent to 26 per cent and the average card rate is about 17 per cent.

The site’s spokeswoman Michelle Hutchison says credit cards can be useful if you keep them under control and pay them off in full each month, otherwise it’s best to stick to paying using debit.

“It doesn’t matter what the interest rate is on your credit card if you are paying it off in full every month,’’ she says.

“But if you can’t pay your card off every month then you need to look at better managing your money and how you can spend within your means.”

Originally published as Comparing credit and debit cards

*Comparison rates are calculated on the basis of secured credit of $150,000 over a 25 year term. Please note this comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.