Debit Cards and Credit Cards

Ok, in this post, I will explain some traditional notions of debit and credit, i.e. the Debit card, and the Credit card .

the DEBIT card:

First off, the debit card is your asset, and assets as we all know, are GOOD. Why is it an asset? Simply put, it is because the bank owes you money. Whenever you go to a bank, open an account and put money into that account (deposit), you are, in actual fact, loaning your money to the bank for an indefinite amount of time. Therefore when you put money into that account, you increase your assets (DEBIT).



Because debit cards are tied to your account, you can use it like a credit card, swipe it and money will be deducted from your bank account. But if you have no more money in your account, be prepared for an embarrassing situation when the cashier tells you your card just got rejected.

So because the act of putting money into your debit card bank account is a Debit transaction (ASSET increase) thus the name 'Debit Card'.

the CREDIT card:
Understand this, the Credit card is a liability, sometimes its a HUGE one. Many young people have fallen prey to its allure and have been blacklisted on credit lists all around the world. Liabilities as we know give us money to spend (GOOD) but we have to pay it off later (BAD). Why is it a liability? because whenever we use the credit card to pay for something, i.e. that sexy black dress found on Zalora that cost RM200, we are in fact, getting the bank to pay for us first and we have to pay the bank later for that RM200 dress. In other words, we owe the bank RM200.

Therefore, the more you use your credit card, the more your liabilities increase (CREDIT).

Credit cards are fun to use because they give you a sense of infinite money supply. Its all good, provided you can pay your credit card bills (i.e. what you owe the bank) at the end of the month, if you don't you will get hammered by some HIGH interest rates, which is what will kill you (financially of course).

My general advice is to STAY AWAY from credit cards, especially if you are young, immature and are not financially educated. Stick to debit cards, while they can lead to potentially embarrassing situations, they will not cause you to be blacklisted for life if you mismanage them.

So because the act of swiping your credit card is a credit transaction (LIABILITY increase) thus the name 'Credit Card'.