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

7 February 2023
Debit Card Versus Credit Card Whats the Difference

Many people brag about their credit cards piling up in their wallets every time they go shopping. Sometimes you feel envious whenever you stumble upon them in grocery shops while you are paying for your items using your debit card. 

 

Here’s one tip of advice: you don’t have to feel that way. You never know what’s behind that credit card usage. You’d be surprised if you knew they are paying high interest monthly apart from credit card limit spending. 

 

So, what’s wrong with using a MasterCard or Visa debit card? Why can’t you get your credit card application approved? Find out their differences and discover which one you should use best.  

 

 

Debit Card: What is it and How it works

A debit card, or prepaid debit card, is a card issued by banks and some financial institutions that has similar functions to ATM cards. It allows you to spend money that comes directly from your savings or checking account. It can be used to buy goods, pay for services, and withdraw cash from ATMs. Thus, it eliminates you from carrying physical cash or checks to make purchases. So it is convenient to use.

 

 

Benefits and Features

One of the greatest benefits of prepaid debit cards is that it is safer than to carry cash with you, especially if you jump from one place to another. It is also easy to get since it does not require a credit rating when you apply for one. Of course, debit cards do not incur debt.

 

 

Considerations

Debit cards are linked directly to your account or a certain financial institution. So, every time you spend, it automatically deducts from your funds. It allows you to set your budget, but it is not ideal for big debit card purchases if you have limited funds. What’s more, it is associated with different fees depending on your bank debit cards and the type of debit card transaction.

 

 

Credit Card: What is it and How it works

Credit cards are the exact opposite of debit cards in terms of fund sources because you purchase goods and services by letting you borrow money from your credit card issuer. It enables you to buy big-ticket items and pay them back in full or in installments plus interest. One example of it is buying a house and lot in the Philippines. 

 

So, it is best recommended for financially responsible individuals and those who want to build good credit health.

 

 

Benefits and Features

The benefits and features of credit cards are innumerable. For one, you can buy particular items on credit if you don’t have cash available. Second, it is the most accepted mode of payment for both local and international purchases. Hence, you don’t have to worry about traveling anywhere and purchasing goods and services.

 

Moreover, credit cards can also be used in financial emergencies. Some credit cards allow you to withdraw cash up to your credit limit or cash advance with no interest upon withdrawal. Other credit cards also feature discounts, cashback, and rewards for your favorite spending activities.

 

 

Considerations

Credit cards are not for everyone because you need a good credit history to qualify. Hence, applying for one in credit card companies is quite challenging. In addition, if you purchase items and don’t pay them off on or before the due date, you’ll end up paying interest and other charges. Therefore, you must know how to manage your spending habits to avoid the temptation of frequent credit card use. 

 

Another factor you need to consider about credit cards is the annual fee. Most credit cards have high annual fees, regardless of your credit limit and type of credit card.

 

 

Best Practices to Follow in Making Credit and Debit Transactions

Both credit cards and debit cards offer advantages and disadvantages, but it usually depends on the user and spending habits. Here are some best practices to follow in a debit or credit card transaction.

 

 

  • Know your bad habits.

Debit cards and credit cards are often called spending cards. You have the purchasing power to buy the things you want and need. But if you have bad habits like being easily tempted to make a purchase, these cards aren’t for you. For debit cards, you might even lose all your savings. For credit cards, you might be piling up debt.

 

 

  • Always track your debit and credit card transactions.

Always keep a record of your debit and credit card transactions. This will help you monitor your expenses and what needs to be paid. If you don’t like paperwork, use mobile apps to keep track of your transactions.

 

 

  • Monitor your bank account.

It is also important to regularly check your bank account to determine your cash flow. Do you have sufficient funds for your expenses? If you have plans for investment or other financial goals, it is best to get a separate account to ensure it cannot be used on other expenses. 

 

 

  • Make it a habit to understand your credit card bill.

Before paying your credit card bill, always review your statement of account to avoid getting penalties and surcharges. It is recommended to pay more than the stated amount due if you have extra money available.

 

 

  • Choose credit cards for big purchases.

Take advantage of credit cards for big purchases. Most credit cards offer a "buy now - pay later" program and big discounts on selected shops. This will allow you to manage your budget and avoid breaking your bank account.

 

 

Whether it is a debit or credit card, the best card you should use depends on your needs and credit score. If you want an easy application with no obligations in the long run, use a debit card. But, you need to fund your savings that are linked to your debit card. 

 

Meanwhile, if you want to buy something bigger and you have a good credit standing, a credit card is the best option. It is the most preferred method of payment for many merchants and services, and this includes paying for an affordable house and lot for sale.

 

But in Lumina Homes, homebuyers can choose a selection of payment options. You can pay via debit or credit card, whichever is available and fits your budget. You can also opt for in-house and bank financing if you don’t have both. Lastly, Lumina Homes accept housing loans from PAG-IBIG. So, there’s no reason you can’t own an affordable house and lot unit in Lumina Homes.  

 

Do you want to know more about our housing packages and inclusions? Tap our message box for details and inquiries. You can also visit the nearest Lumina office for booking and reservation.

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