Credit Card vs. Debit Card

Credit Card vs. Debit Card

Credit Card vs. Debit Card

As I was driving to do my Christmas shopping, the radio was announcing the latest statistics regarding the use of debit cards for Christmas shopping.

It appears that the use of debit cards this festive season has risen from 32% last year to 40%. In addition, the total credit card debt is gradually reducing. This information was very pleasing to my ears. Finally, the message about overspending at Christmas, and more importantly, loading up with credit card debt seems to be getting through to the public.

The good news is that people appear to be saving for Christmas and then only spending what they have saved through the use of a debit card. The advantage of the debit card is that once you have spent all your money, you can’t go into debt using the card.

Gregory Mowle, a University of Canberra lecturer, interviewed 26 bankrupts and found that credit card debt was a major contributor to their bankruptcy. This information was backed up by Victoria’s Consumer Action Law Centre. They found about half the people who contact their office have credit card debts of over $10,000 with one a week having credit card debts of over $100,000. Once you get on the slippery slope of credit card debt, there is no telling where it will go. Changing your spending habits to using a debit card is a step in the right direction.

You need to remember, that once you have an unpaid credit card balance at the end of the month, all future purchases are charged interest from the day they are purchased. So the first month you can’t pay the balance. The sensible thing to do is consider not using the card again until you have repaid the balance in full. Provided you can pay the balance at the end of year month; credit cards can be quite useful to cover unexpected emergencies.

In my book ‘Map Your Finances’, a chapter is devoted to Consumer Finance. With regards to credit cards, I make the following statement:

“If I asked you to tear up a $50 note at the end of each month, you would think I was crazy. If you have a credit card debt of $3,500 at 17.25%, you are wasting $50 a month in unnecessary interest cost.”

When it comes to credit cards, banks are not your friends. Think of how much interest they can charge on a credit card, compared to other loans. They will happily keep increasing your credit limits and even consolidate all your credit card debts when you get into serious financial trouble. Please, don’t let your money management and future wealth creation get sidetracked with these enticements.

Financial Mappers is an excellent tool to manage all your debts including both credit card debt and personal loans. Watch the video ‘I want to manage my debts’.

In addition, Financial Mappers can help you create a Debt Management Report, based on your debts, which will give you strategies to reduce that debt.

For free advice on all matters financial, I always say the first place to start is ASIC’s MoneySmart. Here are some links to get you started:

Credit Cards
Debit Cards
Free Financial Counselling


Glenis Phillips, F Fin

Disclaimer: Financial Mappers does not have an Australian Financial Services License, does not offer financial planning advice and does not recommend financial products.

I am a founding board member of Plencore Wealth Ltd and Plencore Online Pty Ltd. I am the designer of the product Financial Mappers and Financial Mappers PRO, cloud based modelling software for Personal Finance. This software is sold on the web site am an educator, investor and expert in both personal finance and mathematical modelling and the author of 'Map Your Finances'.I have both a Graduate Diploma in Applied Finance and Investments and a Diploma in Financial Advising from the Securities Institute of Australia. I also have a Financial Analysis Certificate, by Distance Learning from University of Technology, Sydney. I am a Senior Fellow and Senior Mentor of FINSIA.
line-height: 1.3em;