Credit vs debit: How to choose the right bank card for your financial goals

Choosing the right bank card is important, as it should align with your personal financial needs and goals.

Certified Financial Planner, Paul Roelofse, emphasises the importance of understanding the differences between credit and debit cards.

While credit cards are often associated with being debt traps, they can offer distinct advantages, including zero transactional fees, unlike debit cards, and rewards, including loyalty points.

“You have got to understand it [credit cards], the devil is in the detail when you look at the statement,” Roelofse said.

He cautioned against overspending and maxing out the credit card, and stressed the importance of paying off the full balance before the due date to avoid interest charges.

Timely payments and low credit utilisation can also help build a healthy credit score.

“If you pay the full amount of the card within that window, you’ve got free money; there are no charges,” he explained.

“But if you don’t pay that full amount, you go into a debit… then they apply that interest, and it can become very punishing… Getting charged 26% [on interest] negates any benefit.”

Roelofse recommended allocating a specific monthly amount of your credit card and keeping it in an interest-bearing account, such as an access bond or money market account, to earn interest and avoid paying interest on the credit card.

To listen to Roelofse in conversation with Mongezi Koko (in for 702’s Gugs Mhlungu), click the audio player below: