Debit vs credit cards: What's the difference? 

When it comes to managing your finances, understanding the differences between debit and credit cards is essential. While both are commonly used for making purchases and provide convenience, they function differently. In this article, we'll explore the world of debit and credit cards and their unique features and help you decide which suits your financial needs best — or whether both are right for you!

How debit cards work

Debit cards are directly linked to your bank account. When you make a purchase using a debit card, the funds are immediately deducted from your account balance. 

Debit cards can also be used to withdraw cash from ATMs. However, keep in mind that some ATMs may charge fees for using a card from a different bank. That's why choosing ATMs affiliated with your bank is best to avoid extra costs.

How credit cards work

Credit cards provide you with a line of credit that you can use to make purchases. Each credit card has a credit limit, which is the maximum amount you can borrow. When you make a purchase using a credit card, the card issuer pays the merchant on your behalf, and you will need to repay the amount later.

There are two repayment options you should know about. You can either repay 4% of the outstanding amount or 100%. You can select the repayment option you prefer through our mobile banking app.

Credit cards offer a grace period, which is the time between when you make a purchase and when the payment is due. To avoid interest charges, you have to pay off your balance in full during this period. However, if you carry over a balance, interest will accrue on the outstanding amount.

What are the benefits of using debit cards?

Debit cards offer several benefits that make them a popular option for many people. First, by using a debit card, you can only spend the money you have. This can help you stay within your budget and avoid accumulating debt. Also, since the funds are deducted immediately, you have a clear picture of your financial situation at all times.

Furthermore, debit cards are widely accepted, making them convenient for everyday purchases. Whether you're shopping online or making transactions at a physical store, your debit card can be used almost anywhere. 

What are the benefits of using credit cards?

Credit cards also come with their own set of benefits. One significant advantage is the ability to make purchases even when you don't have sufficient funds in your bank account. This can be particularly useful in emergencies or for larger expenses that you prefer to pay off over time.

Additionally, when using Bank al Etihad credit cards, you have the option to activate Easy Payment Plans. These plans turn your purchases into monthly interest-free instalments, which can be spread over a period of up to 36 months, depending on the merchant where the purchase was made.

What should you consider when choosing between debit and credit cards?

When deciding between a debit and credit card, it's essential to consider your personal financial situation and goals. If you prefer to have strict control over your spending and want to avoid debt, a debit card may be the better option. On the other hand, a credit card might be more suitable if you value flexibility and want to build a credit history.

Consider your spending habits, financial discipline, and ability to pay off credit card balances in full and on time. Also, make sure to check what fees are associated with both types of cards, such as annual fees, interest rates, or foreign transaction fees. By evaluating these factors, you can choose the card that aligns with your financial needs and goals.

Before we say goodbye, we want to remind you that you can earn cashback regardless of the type of Bank al Etihad card you carry! To learn more about our rewards program and the factors influencing your cashback percentage, click here.