4 reasons why some Singaporeans still use debit cards

There are many reasons why credit cards are better than debit cards, as we've discussed previously.

Chief among them is for minimising the impact of fraudulent transactions. With credit cards, if you discover a suspicious transaction, you can simply report it and have the charge reversed so you won't be on the hook when the bill arrives that month. The money in your bank account remains safe and untouched.

Security aside, the ability to earn cashback, air miles and rewards without spending more, makes credit cards a no-brainer for most Singaporeans. In fact, there are online communities that are dedicated to discussing how to best hack popular air miles cards in Singapore, including the Citi PremierMiles, Amex KrisFlyer, UOB PRIV Miles, DBS Altitude, and the newly-launched OCBC 90N.

However, there are legitimate reasons why some Singaporeans still use debit cards - and why they could still have a place in our wallets.

#1 WHEN USING CREDIT CARDS INCUR EXTRA COSTS

When shopping overseas or at online stores that charge in foreign currency, using a credit card would incur additional charges and unfavourable foreign exchange rates.

In such situations, it would make sense to use a debit card linked to a multi-currency account, like the DBS Multiplier or UOB Mighty FX to make your purchase.

#2 ZERO CHANCE OF INCURRING DEBTS

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At about 25 per cent per annum, the interest charges for late payments to your credit card is dangerously high.

If you are not financially disciplined to spend within your means and pay off your entire balance on your credit card, a credit card could cause you to get into debts that can quickly and easily snowball.

With a debit card, however, there is no chance for you to get in debt, and no bill that you could forget to pay at the end of the month, since you can only spend as much money as what you have in your bank account.

That said, you should strive to develop good budgeting and disciplined financial habits, regardless of whether you spend on a debit or credit card.

#3 WHEN BUYING FROM SMALL BUSINESSES

Credit cards are known to be more expensive to merchants compared to other payment methods. As a result, some businesses may impose a minimum spend or not accept credit cards at all.

Sometimes, merchants may also require you to pay using cash, NETS or debit cards if you want to take advantage of promotions and discounts.

Using debit cards would allow you to still enjoy cashless convenience while shopping at businesses that do not accept credit card payments.

#4 WHEN YOU DO NOT MEET THE INCOME CRITERIA FOR CREDIT CARDS

To apply for most credit cards, you typically need to have an annual income of $30,000 and more.

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This means that some groups of people would be automatically excluded, such as fresh graduates who are just starting work and don't have an income history, retirees and housewives, or working adults who don't hit the minimum income criteria.

For those who don't have access to credit cards, debit cards offer many of the same advantages of credit cards: convenience of contactless payments, ability to make online transactions, and omitting the need to carry large amounts of cash.

DEBIT CARDS STILL HAVE AN IMPORTANT ROLE TO PLAY

When it comes to credit cards or debit cards, it doesn't have to be all or nothing.

Even if you qualify for a credit card, a debit card (especially one that is linked to a multi-currency account) might be useful enough to earn a spot in your wallet so you have the option to choose the best means of payment for each transaction you make.

This article was first published in Dollars and Sense.