Weighing-In On Credit vs Prepaid vs Debit Cards

Cashless transactions have changed the way we pay for our items, whether physically or online. Before, in order to buy something, you would need to have cash at hand to pay at the register. This would involve you seeing something you like, realizing you don’t have cash on you then running around looking for an ATM. Then when you find it you see that EVERYONE is using it so you sit in a queue for 15 minutes because some guy decides he wants to withdraw 5 different times. Huge hassle. Well, now you don’t need to do that anymore. You just go straight to the counter, whip out your card and voila!

Whether it’s a credit card, prepaid credit card or debit card, each one has its own set of strengths and weakness depending on the situation. And while you may favor one over the other, a specific type of card may better suit your needs and finances better than the rest. So to help you determine which one is best to use, we’ve made a list of recommendations when to go credit, prepaid or debit.

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1. For buying big ticket items

We recommend:
Credit card

One of its biggest edge over the two other types, a credit card, in concept “lends” you money to buy items — even those which cost above of what you have saved or earned. It lets you purchase items in advance and pay for it in installments. While it is still possible to use debit or prepaid credit card to buy expensive items, for example for household appliances, you’ll have to pay for these upfront using cash that you currently have.


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2. For buying small, everyday items

We recommend:
Debit card

It’s easier to forget items you bought which cost a couple of hundred pesos. And these small payments, if made often, will accumulate and make a serious dent on your credit card debt if you’re not careful. So it is wiser to pay for these small items in cash or debited directly from your account.

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3. For frequent travelers

We recommend:
Prepaid credit card

Prepaid cards are awesome alternatives to cash and travellers’ checks when you go abroad. Some prepaid cards, such as BDO or EastWest Bank Visa Travel Money Card even allows you pay in the local the currency (US dollar, HK dollar, AU dollar, SG dollar, Euro, Pound Sterling, Yen and Reminbi) forgoing foreign exchange rate fluctuations, and saving you thousands of pesos in the process. Just make sure you top more than enough during your trip (you’ll never know when you’ll encounter emergencies, and bring your credit card too, to be safe).

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4. For online shopping

We recommend:
Credit card 

For safety purposes, never use your debit card when shopping online. If somehow you input your account details to a website with scams or frauds, hackers can easily access and wipe clean your bank accounts. Credit cards gives you an extra layer of protection through fraud protection. Some banks have put in place safety nets where they assign you a different card number to use when you shop online.

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5. For those who do not have a credit card

We recommend:
Prepaid credit card 

Banks are normally cautious to award credit cards to first time holders, for lack of credit history to back you up. So having a prepaid credit card is a great way to have some of the perks of owning a credit card AND to build (or rebuild) your credit history. It’s your doorstep to maybe being approved for a credit line (not just credit card but loans too) in the future. Learn more about prepaid credit cards to see the advantages and disadvantages of having one.

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6. For heavy spenders with little to no control over spending

We recommend:
Prepaid credit card 

Save yourself from your swipe-happy ways and from mounting credit card debt with a prepaid credit card. Topping up a set amount per month will make it easier for you to allot a budget for your shopping without breaking your bank.

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7. For those who want rewards, promos and discounts

We recommend:
Credit card 

Banks offer some of the sweetest deals exclusive to its loyal credit card holders. Some cards offer rebates or you can collect points you can exchange for rewards each time you use your card. Check out the best credit card promos from different banks for October 2015!

You can check the table below for a summary to help you distinguish the features of credit, prepaid and debit cards:

 Credit cardPrepaid credit cardDebit card
Payment featuresPurchases get charged to creditPurchases are credited to topped amountPurchases are deducted from your bank account
Perfect forBuying big-ticket itemsCurbing impulse buyingBuying everyday items
Watch out forGoing over limit, paying latePaying beyond topped amountOverdraft fees
Security featureSecurity code or signatureSecurity code or signaturePIN code
Credit limit5 figures and aboveDepending on how much you top upAverage of P100,000
Ease of approvalDifficultEasyEasy, if you meet bank’s minimum requirements
Ease of useAccepted worldwideMasterCard and Visa cards are accepted worldwideMasterCard and Visa cards are accepted worldwide
Linked feesLate fees, compounding interestSign up fee, reloading fee, ATM feesOverdraft fee, tax
Online paymentscheck88check88check88
Pay in installmentscheck88letter x3letter x3
Accessible fundsletter x3check88check88
Charge interestcheck88letter x3letter x3
Earning interestletter x3letter x3check88
No maintaining balancecheck88check88letter x3
No initial depositcheck88Depending on bank and type of cardcheck88
Rewards and promoscheck88LimitedLimited
No forex feesletter x3check88letter x3
Security riskMediumLowHigh

Have you decided to get one? Make sure to find a credit card that matches your lifestyle.

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