When Is A Debit Card More Dangerous Than A Credit Card?

Category: Credit Card

Breaking it down, your debit card is essentially a plastic check. That means that whenever you make a purchase, it directly takes the money out of your account. Because of this, there will be no bills and you won’t be paying any interests. More than that, debit cards are also known as ATM cards, which allows you to take cash directly out of your bank account. 

This all sounds great, but the greatest caution tape around this card is the safety of it. It is due to the fact that your funds immediately get transferred, it will be extremely strenuous to get your funds back. 

To illustrate, if a hacker or a thief gets a hold of your card and goes on a shopping spree, that hacker can easily get away without alerting any authorities while you struggle to get your funds back. Whereas when a fraudster gets a hold of your credit card, there is a buffer zone between your cash and the fraudulent transaction. 

Delving deeper into this topic, here are five reasons why using a debit card can be more dangerous than a credit card. 

Related: Credit Card 101: Everything You Need To Know About Credit Card

1. Identity theft can be much worse if your debit card is stolen 

The Association of Banks in Malaysia (ABM) announced that a card holder’s maximum liability for unauthorised transactions is capped at RM250. This should give you a lot more confidence as the maximum loss you can take on your debit card is your entire account if the limit is not set up. 

So when you notice that your debit card is lost, you have to notify your bank immediately to cancel out your card to prevent any transactions from being performed. On the other hand, if you can prove that you aren’t the person who made the transaction using the credit card, it is much easier to reject the payment and you won’t have to pay for the transaction. 

2. Debit cards are useless in a crisis

For instance, you have an emergency medical situation and the cost of the operation amounted to over RM10,000. For some, it may be a manageable amount, but for others who don’t have this money, they will be backed into a corner. The difference here is that debit cards don’t usually allow overdrafts but credits cards, however, will cover you for the time being. 

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Emergency fund.

Before moving on, we want to make it clear that a credit card is not an emergency fund and that you should stay away from this mindset. But, if the situation is really urgent, a credit card does have the ability to help you pay off the bill. Which then also allows you to repay this amount through an instalment plan. 

3. Cashbacks and reward points

If you’re in the working class, chances are that you’ll be buying a number of items throughout the week. If so, you might as well earn some rewards on the money that you’re already spending. I mean, why not? 

Most credit cards have cash back schemes and points for each purchase you make. You can then redeem them for flights, hotel stays, or some other products. 

However, be wary as well because some individuals might be tempted to spend even more just to get the points. After all, that is exactly what the companies want while you end up with more credit card debt. The notion here is to think of the rewards as a bonus of using a credit card, nothing more. 

Related: Should You Have More Than One Credit Card?

4. Build credit history

Especially as a young individual, another vital reason to opt for a credit card rather than a debit card is that it will build and improve your credit history. Debit cards do not strengthen your credit history in any way whatsoever. 

Why? Because life may be much more challenging if you don’t establish a good credit history. Your credit history is what will help you down the road as you finally decide to take a car loan, mortgage, or even a cell phone plan. It can also help you get better terms and even land you a job. 

5. Universally accepted

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Using a credit card on a vacation

This directly translates to not having to carry a load of cash when you travel. Visa and Mastercard are by far the most widely accepted cards.  

On top of that, debit cards can often be problematic when you check into a hotel or rent a car. These companies take a certain amount (most often a high amount) until the final cost becomes apparent. For example, if you’re checking into a hotel that costs RM100 per night, they might charge you RM150 initially just in case there are any incidentals. 

If you’re using a credit card, however, this “hold” reduces your available credit, not the money in your bank account. In other words, your budget for the rest of your vacation won’t be affected at all. 

Related: American Express Cards Are Rare In Malaysia – Here Are Ways You Can Use It

Looking for a credit card that suits your needs? Apply for the best card through our comparison page here.