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Credit Card versus e-Wallet: What’s the Difference?

A couple of days ago, Grab Malaysia launched PayLater, a post-paid payment option for all of its services – Grab rides, GrabFood and GrabExpress. Essentially, it’s a payment method in which Grab lends you a specific amount of credit (for example, RM300). You will then be eligible to use the credit to pay for your services. Of course, by the 7th of the following month, you need to pay back the amount of credit you’ve used.

It’s an impressive new feature, isn’t it?

This is only one of the few instances smartphones have transformed how we make our payments. Whatever you wish to call it – e-Wallet, Digital Wallet, or Mobile Wallet – it’s certainly making a huge wave across the globe just for its convenience. Technology has really come so far that you can basically do anything with your smartphone!

The advent of new technology doesn’t mean you should abandon tried-and-true methods of accepting payment, however. Credit cards are still important today so we’ve decided to compile a brief summary on how credit cards and e-Wallet differ from each other as well as its benefits and risks.

Credit Card vs e-Wallet
You can download the PDF here!

What is a Credit Card?

A credit card is a type of payment card that allows you to borrow money from the bank to make your purchases of goods and services.

How it Works:

Each transaction you make with your credit card is tabulated in your credit card bill at the end of the monthly billing cycle. After purchasing the goods and services of your choice, most banks will give you a “grace period” pay back the amount you used. Failure to pay on time will result in penalty charges as outlined in your product disclosure sheet when you signed up for your credit card. 

Features:

1.    Credit limit: A credit limit is the maximum amount of money a lender will allow a consumer to spend using a credit card. The limits are determined by credit card issuers based on several pieces of information related to the borrower. For instance, the borrower’s credit rating, personal income, or loan repayment history. 

2.     Balance: The balance on your credit card at any given time is the total amount you owe including purchases, finance charges, and fees. The higher your credit card balance, the lower the available credit you have to make additional purchases.

Benefits:

1.     Rewards: Some credit cards offer rewards and incentives for using their credit card. Credit card rewards come in several different forms: cash back, miles points to redeem, and discounts on future purchases. You can earn rewards on some or all of your purchases. These rewards can be redeem once you’ve accumulated a certain amount depending on the rewards program.

2.    Builds Credit History: Responsible use of a credit card over time builds your credit history. This qualifies you for better interest rates and other financial benefits.

Risk:

1.    Credit Card Fraud: Credit cards can be stolen too, unfortunately. They may be physically stolen, or someone may steal your credit card number to use your card to rack up debts. The good news is that, unlike cash, if you realize your credit card or number has been stolen and you report it to your credit card company immediately, you will not be charged for any purchases that someone else has made.

What is an e-Wallet?

An e-Wallet is like the digital equivalent of your real-world physical wallet and often appears as an app on your smartphone. There are two types of E-Wallets – network based e-Wallet which stores digital money on the cloud such as Boost and Touch ‘n Go e-Wallet, or card based e-Wallet which rides on an existing card networks like Visa, Mastercard, China UnionPay; examples of card-based e-Wallet are AEON WALLET and BigPay.

How it Works:

e-Wallet act as substitutions and only capture the transactions made with the money that is stored within the e-wallet itself. Payment methods varies from QR-codes to in-app payments to online payments (transfers using Near Field Connection (NFC) technology also exist, but aren’t supported by a lot of smartphones)

Features:

Each e-Wallet possess different features but the most common would be the option to transfer funds between individuals. There are also features like buyer protections, loyalty card integration, and proprietary magnetic strip technology.

Benefit:

1.    Easy to Use: Incredibly user friendly, e-Wallet only requires buyers to download the app and follow the instructions provided on the screen.

2.    Convenient: Most places these days accept e-wallets with GrabPay being the leading e-wallet in both Singapore and Malaysia. Other notably aspects of e-wallet include users are able to get through a purchase in mere seconds with a simple tap. They can also scan their mobile device thus making the shopping experience quicker and easier. It is also simple and accessible to top-up your e-Wallet since it can be done through credit card, debit card, online banking and MOLPay cash at 7-11

Risk:

1.   Security: One of the biggest risks with e-Wallet is its security. With the rise of e-wallets giving convenience to users, it is also opening new doors for money-hungry hackers. Online payments are powered by Quick Response (QR) codes which efficiently allow financial transactions to be one scan away. This does not mean, however, that they are completely safe, as these QR codes may contain potentially dangerous links within them.

And there you have it!

Our guide in Credit Card vs e-Wallet. We hope this article proves valuable and informative for you!

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