One of the most significant differences between a mada card vs. credit card is how payment is handled. With a mada card, funds will withdraw immediately from your bank account when you make a purchase. When you use a credit card, you take a loan. Read more to learn about the key differences!
Mada Card
A mada card is a bank card linked to a current account. Specifically, your bank issues you a mada card for transactions in person, online, and through ATMs. Subsequently, when using a mada card, money will withdraw directly from your linked account. So, you are using your own money to make purchases.
Credit Card
Comparatively, credit cards are provided by credit card companies and other financial institutions. Essentially, as mentioned above, a credit card is a type of loan. For this reason, when using a credit card, you are borrowing money from the credit card company under the premise that you will pay it back eventually.
Unlike purchases with a mada card, charges on a credit card will go to the credit bureaus. In Saudi Arabia that is SIMAH, which means credit cards will help you to build credit.
Mada vs. Credit card
Here is the difference between a mada vs. credit card:
| Topics | Credit Card | Mada Card |
|---|---|---|
| Annual Fees | Many credit cards have an annual fee. | You can withdraw money from an ATM, but if the ATM owner is a bank different from the one you use, you may be charged a fee for using their ATM. |
| Rewards | Earn rewards in the form of points, miles, or cash back that can be redeemed for cash or products. | Mada cards do not always offer the chance to earn rewards. Check with your bank to see if they offer any incentives. Alternatively, you can gain loyalty points for example at your favorite store (Virgin Megastore or Sephora) with their store loyalty program by making an account with them. |
| Late Payment | You have to pay interest if you don’t make your payments in full for the month, or if you don’t make your payments at all. | No late payment charge for using a mada card as it is directly tied to your current account. |
| SIMAH | Purchases will be reported to the credit bureau (SIMAH) and will help you build your credit score. | Purchases made with the mada card will not be reported. |
| ATM Withdrawals | Many credit cards also allow you to withdraw money at an ATM, but the ATM owner may charge a fee for using your credit card to withdraw funds. | You can withdraw money from your bank’s ATM free of charge. |
| Fraud Protection | Most credit card companies offer fraud protection. If your card is used to make a purchase that was not yours, you should notify your bank and make a claim on the wrongful charge to your card. | Mada cards are not usually offered the same level of fraud protection as credit cards. We would suggest setting up alerts (email, SMS) so are notified every time your mada card is used to make a purchase. |
So, which should I use?
In essence, if you pay your credit card bill on time – go for the credit card. Through credit cards, you will build your credit score and can accumulate points for rewards.
However, if you don’t think that you’ll be able to make your monthly payment in full, and you don’t think you’re that disciplined, then a mada card is better for you.
But if you are concerned that you will overspend and want to limit spending, go for a mada card. In that case, the mada card makes sense for most purchases. Furthermore, mada card purchases are always tied to the balance in a bank account. So, you have some automatic control over spending.
In conclusion, it may also be easier to track mada card purchases than credit card ones. Keep in mind that mada card purchases don’t carry the same protections as credit cards, and they won’t help you build credit.
A great way to keep track of your expenses, budget, and saving goals will be to use our family payment app FataFeat!