💳 Credit CardsCredit card, EFTPOS or debit card: which should you use?
Most people in New Zealand have an EFTPOS or debit card linked to their everyday account, and many also have a credit card. The question is which to use in different situations. EFTPOS and debit cards are simple and mean you can only spend money you have. A credit card gives interest-free days, often better travel cover, and stronger consumer protection — but also a risk of spending more than you should. Here we go through when each is the right choice.
Everyday spending
For everyday spending, EFTPOS or a debit card works well: the money comes out straight away, you see the balance fall, and it is harder to lose track. If you know a credit card tempts you into more spending, the debit card is the safer choice. Note that EFTPOS does not always work for online purchases or overseas — a Visa or Mastercard debit card does.
If you are disciplined and pay the full credit card balance every month, you can use the credit card for everyday spending too and collect Airpoints or rewards — but the benefit is small and the risk is that one month runs away from you. Set up an automatic payment for the full closing balance if you do.
Travel and online
Here the credit card weighs more heavily. Many credit cards include travel insurance if you pay for the trip with the card, and for a rental car or hotel a hold is placed against the credit rather than against your own money in the everyday account.
For online shopping a credit purchase gives an extra layer of protection: if the retailer fails to deliver or goes out of business, you can request a chargeback through your bank. Watch the foreign transaction fee, though — often around 2-3% on overseas and some online purchases, on both credit and Visa/Mastercard debit cards. Some newer debit cards and travel cards waive it.
Avoid the trap
All the credit card's benefits assume you pay the full closing balance on time. The moment you start to carry a balance, interest — often around 20% a year — quickly eats the value of Airpoints, rewards and insurance many times over.
A simple rule: use a debit or EFTPOS card for everyday spending, a credit card for travel and online purchases where the protection matters, and never carry a credit card balance from one month to the next.
Frequently Asked Questions
- Is it safer to shop online with a credit card?
- Often yes. On a credit purchase you can request a chargeback through your bank if the retailer does not deliver or goes out of business. With EFTPOS or a debit card the money has already left your account and a dispute can be harder, though Visa/Mastercard debit cards also have chargeback rights.
- Do I need a credit card at all?
- No. Many people manage well with a Visa or Mastercard debit card, which works online and overseas. A credit card with no annual fee can still be worth having for the travel insurance, the rental-car hold and the online purchase protection — as long as you always pay it off in full.
- Can I withdraw cash on a credit card?
- Yes, but avoid it. A cash advance on a credit card has no interest-free period and usually a cash advance fee, so interest starts immediately. Use EFTPOS or a debit card for cash.
Informational content, not financial, tax or legal advice. Check amounts, limits and current rules directly with the official sources (Work and Income, the Reserve Bank of New Zealand, Inland Revenue, the Depositor Compensation Scheme) before making a decision.
