Many Australians are beginning to use debit cards instead of credit cards.
With the credit crunch, there has been a drop in the number of people being approved for credit cards. If you find yourself with poor credit, you may prefer to use the debit card advantage instead of credit cards.
Debit Cards Comparison
Credit file and credit cards
Previously, it was very easy to get a new credit card. Banks would approve them almost on application and had more lenient procedures for card approval. However, with the credit crunch, banks have become more stringent in their lending criteria. In addition, many people have lost their jobs or are facing financial hardship, and they’re finding it difficult to obtain a new credit card with their credit files being in a bad state, due to late repayments or too many credit card applications made in one time.
The advantages of debit cards
If you find yourself in a situation with poor credit, you may be interested in looking into debit cards. You can enjoy quite a few debit card advantages by using a debit card instead of a credit card.
Debit cards are issued by the same institutions who issue credit cards. This means that the same payment processor is used for processing debit cards, so debit cards are acceptable everywhere that credit cards are, including various retail outlets, entertainment venues. They can even be used for shopping online, through the phone or through mail order catalogues. Debit cards are very convenient since they make it possible to shop via various mediums that only accept credit cards.
Obtaining and using a debit card
It is very easy to obtain a debit card, even if you have poor credit. Debit cards are issued to anyone who has a current account at a bank and there is no credit check required to obtain a debit card.
Since the card is linked to your account, there are no balances that can accumulate. Instead, the card uses funds that are already in the account. So a debit card is like a prepaid credit card in that the money is already paid upfront. Because there are no accumulating balances, it is not possible to accrue interest expenses – this is another debit card advantage that many people enjoy.
Some accounts do have overdraft facilities, and if your card is linked to such an account, it is possible to spend more than the money you already have in your account. In this case, you may find yourself paying overdraft fees and other fines, so you should be careful not to exceed your existing balance when using a debit card.