Debit vs Credit Cards

5月 4, 2021

Credit and debit cards have been the consumer’s choice when it comes to making payment, both are generally used for the means of purchasing goods. Each has its strengths and weaknesses, thus, understanding the differences between debit cards and credit cards will help you make a sounder decision about which one to choose.

What is a Credit Card?

A credit card is one that allows you to spend money you do not have, so you are borrowing money from the card issuer to spend up to a certain pre-agreed limit.   

Typically, the financial institution will issue you with a credit card and this will enable you to access funds from the financial institution (such as a bank).  Any money you borrow, you agree to pay back, and you also pay interest and often charges as per the bank’s terms and conditions.

A credit card works like a loan, there is a pre-approved threshold up to which you can spend, and once you have reached that threshold you can no longer borrow any more money.  

If you do spend beyond the agreed threshold then you are likely to incur penalty fees and accrue interest charges.

Your card issuer will base your credit limit on your credit risk and income. The amount of debt you owe to others may also be a factor. This is referred to as your debt-to-income ratio, or DTI.

Clean credit history, high credit scores, high income, and a low debt-to-income ratio may all work in your favour. The bottom line is: The more the bank trusts you, the higher your credit limit will be.

Each month, you’ll receive a bill from your card issuer. The bill will include the amount you spent during the current billing cycle, any charges on the account as well as any leftover balance from the previous month. Though you might only be required to cover the minimum payment, any amount that falls short of the minimum payments will be charged a hefty interest.

What is a Debit Card?

A debit card is essentially a payment card that allows you to spend money that you already have available and deposited in your account.   

When you buy something using your debit card the money is taken directly from your account, and from monies already within the account.  If you have $200 in your account, but you try and spend $250, your bank will not accept the transaction (unless you have a pre-agreed overdraft limit). 

Differences between Credit and Debit Cards

Debit and credit cards look similar, they are both cards with your name and account number on them, and both can be used to make withdrawals and make payments. 

However, there are huge differences in how they operate and how they affect your payments and income. 


  • Credit cards give you access to funds that do not belong to you, so you end up building debt.
  • Debit cards give you access to funds already in your account, no debt is built.
  • Credit cards charge annual fees, debit cards do not charge fees.
  • Credit cards often charge transaction fees, balance fees, late payment fees, and other fees which debit cards do not have.
  • Credit card spending increases debt, as you are repaying the money you have spent plus interest. Interest rates can be higher than standard interest rates.
  • Debit card payments do not accrue interest as you are spending your own money.
  • Credit cards can affect your credit score. If you do not make the repayments on time and keep your credit balance down then this affects your credit score.
  • Debit cards do not affect your credit score.
  • Credit cards are issued after an assessment of income and credit risk. There is no assessment when issuing a debit card.

A substantial difference between a debit card and a credit card is how they access funds. Both types of cards allow you to make transactions and pay for goods. However, the way in which each type of card executes the transaction is different.

Simply put, debit cards withdraw the amount directly from a cardholder’s account at the point of the transaction, while credit cards acquire funds through a line of credit.

When Should You Use a Debit Card?

Debit cards have many advantages, some of which are listed above. 

Those who are frugal consumers use debit cards to make payments for goods and services as there are usually no hidden fees or interest payments. In addition, debit cards can ensure you are:

  • Protected from fraud – more debit cards are now offering cardholders the same protections formerly only enjoyed by credit cardholders.
  • Avoiding spiralling debt – as the debit card only allows you to withdraw the money you already have, this means you are less likely to accumulate large sums of debt you have to repay.
  • Not paying annual fees – and no late payment fees, fees for withdrawing at ATM machines.
  • Not spending money you don’t have – debit cards make it difficult to spend money that you do not have.
  • Able to access your money immediately, and you can take out cash advances.

When Should You Use a Credit Card?

Credit cards can be useful for some things, for example, they offer good payment protection for consumers, and obviously, they are a draw for those consumers who like to buy now, pay later. 

Some credit cards also offer cashback rewards which can be profitable. 

A lot of people still use credit cards to pay for big-ticket items such as holidays, flights, electronics, and other large items. Credit cards allow you to pay for expensive items without needing to pay all the money upfront. They can offer a flexible way of making payments.

Another use of credit cards is that they allow you to build up a credit history. 

However, recent research from Deloitte has stated that credit card use is declining, especially with the younger consumers. Credit cards are not seen as being as profitable and easy as they used to be, and with debit cards offering similar incentives as credit cards more consumers are preferring to use debit payments. 

One of the main reasons that credit cards are no longer seen as the best choice by consumers is the rise of digital payments and digital debit cards.  As consumers move towards digital payments, there seems less need to have credit cards to hand. In 2019 alone, digital payments accounted for $4.1 trillion worth of payments made. 

AP-1 – Similar to a Debit Card. But Better.

The AP-1 virtual account was launched to simplify all payments into China. With more people trading online with Chinese companies and individuals, whether through small businesses or e-commerce activities, AP-1 makes it easier for transfers of funds to take place.

AP-1 is one of the first few digital UnionPay accounts issued outside of China to facilitate payments by foreign individuals and businesses. AP-1 provides:

  • Faster payments
  • Enables payments and remittances, allowing cardholders to transact via QR code without opening a Chinese bank account
  • No minimum deposit or balance is required

Key benefits of having an AP-1 account include:

  • No restriction on foreign ownership or shareholders
  • No need for directors’ physical presence in Singapore to open an account
  • Remittance to UnionPay accounts within 60 seconds
  • Direct FX rates for China
  • Competitive FX rates for the rest of the world through VISA
  • Worldwide ATM cash withdrawals (coming soon!)

The AP-1 account empowers anyone to be China-ready.  The virtual payments system means that cashless payments can be quickly and easily facilitated.  Those trading with China, or those visiting can now use the AP-1 digital account to make QR code-based transactions, meaning they won’t have to face problems when trying to make payments with international cards and accounts.

Leveraging the network of UnionPay, a global brand that is accepted at over 55 million merchants globally, consumers can benefit from competitive and favourable exchange rates and massive savings.

As the pandemic comes to an end, and the world’s borders begin to open, an AP-1 account will be the primary digital account for those wanting to make payments to and within China.  Remitting funds to China is made easy with an AP-1 account. AP-1 can also be used in retail shops in Singapore.

Millennials are wary of accruing and more conscious of developing good money management strategies. In 2020, the revolving credit debt fell substantially to the lowest recorded amount for 9 years as consumers paid off credit card balances.

Online shopping and commerce have seen a phenomenal increase since the start of the pandemic. Millennials are not keen on credit cards and the level of debt and interest payments that comes with them. Consumers these days are more tech-savvy and want better payment options, such as the AP-1 account which facilitates fast and easy transfers of money in China.

The AP-1 virtual card launched by Aleta Planet in 2020 enables foreigners to make mobile payments like locals do in China through scanning of QR codes, without needing to set up a local bank account in China. The ease of digital payments is the future of payments, whether the payments are business-to-business, or consumer-to-business. 

The key benefits of digital payments include:

  • Easier transactions
  • Transparency of payments
  • Security
  • Global payments facilitated
  • Access to the China business market
  • Access to China’s large consumer market
  • Efficiency and regulation


Debit cards and credit cards are both useful tools when you’re paying for goods and service, what is most important is that you choose the right card for you. Your AP-1 card is more than just a debit card, leveraging the large global payment network of UnionPay to ensure that consumers have access to a secure and regulated payment method. Make the right choice today with AP-1.

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