Are debit cards necessarily lousier than credit cards? I saw a UOB promotion giving 5 miles per $1 for a debit card spending. Why would banks do that? Is it wise for me to just get a debit card?

Debit card - Your own money which is linked to your bank account

Credit card - Bank money provided to you in term of your credit card limit

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So you are actually paying by using the bank money when using the credit card and pay back to the bank on a monthly basis, with the possibility of the bank earning from you via credit card loan interest and annual fee.

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When there is a fruad or disputed transaction for credit card, you will have the advantage of explaining to the bank that it was not performed by you. Whereas, in the case of debit card, the amount would have already been deducted from your bank account and sometimes it may be impossible to retrieve the money back.

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Typically for credit card, it takes a longer time for the merchants/bank to process the transaction, as it will require the merchant to perform transaction settlement, then take some time for the bank to process based on an agreed timeframe. So in the case of credit card, there is a chance that the bank have not release the payment and hence it may be still possible to retrieve the money back.

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In summary, you will be bearing a higher risk instead of the bank for using a debit card. Also, to gain large amount of miles, you will need to deposit/maintain large amount of cash in the bank account. And it will probably benefit the bank in term of cashflow.

There are a few reasons why people take up debit cards rather than credit cards:

• Unable to meet minimum income: For those unable to qualify for the minimum income for credit cards, debit cards are the only option. Most credit cards will have a minimum annual income of $30,000. If you call the bank, some may reduce this minimum salary requirement (e.g. to $25,000), but there is a threshold. For individuals from lower-income groups, banks won't be willing to extend them credit, so they can only have debit cards.

• Expense control: Some people opt for debit cards as a form of financial discipline. Because the money is immediately taken out from your account, there is less temptation to spend beyod your means. It's really quite easy to blow large amounts of cash with credit cards if you're not careful. You can just pay off the credit card interest while barely touching the principal. In fact, that's probably the best scenario for the bank - you'll be paying them 25% interest every year, and as long as you don't finish paying back the principal amount, you'll never be debt-free.

• No annual fees (usually): Most debit cards do not charge annual fees. This is isn't really a benefit though, because most banks will waive your credit card annual fees too. Just call up the bank and ask them to waive it - most times, they'll do so.

However, it's a good idea to have at least one credit card. It's important to build up credit history, because that will help you get better loan terms when you take out a mortgage, car loan, or other big-ticket loans. Credit cards are also more ideal for use while travelling. They come with more fraud/theft protection that debit cards. Also, credit cards tend to have better promotions/benefits (e.g. cashback, rewards, etc.) than debit cards, which makes it more worthwhile to use.

You don't have to use the credit card that often, but occasional use plus paying your card bills on time will actually be beneficial in the long run, primarily because you'll be better off when you take out loans from the bank.

Check out this guide on Singapore's best SME credit cards if you run a business: https://www.providecover.com/12-best-sme-credit...