Which is Better Credit Card Or Debit Card?

Which is Better Credit Card Or Debit Card?

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26 Jun 2021
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Which is Better Credit Card Or Debit Card?

Credit cards and debit cards are both equally handy instruments of payment. Both of them eliminate the need to carry cash everywhere. With cards, all you have to do is swipe them and the payment is done. But both of them differ vastly in their operation, the key difference being the source and process of the money deduction whenever a payment is made. It may be prudent to keep a debit card to control your finances, especially expenses and stick to the bank balance. In other cases, credit cards can prove to be a great resource by giving you the opportunity to buy now and pay later by letting you pay the credit card bill once, rather than having to worry about it every time you make a payment. There are additional parameters too: what are the rewards you are receiving? Are their associated perks? Are you able to have significant savings?

Let us look at why credit cards can answer these questions for you and how they are the better option the next time you want to swipe at the POS or at the checkout of an online store.

1. Manage your Payments

The first and foremost struggle with a debit card is that you are spending money each time you swipe your card. That depletes the funds you have in your bank account. In times of emergencies, a debit card cannot help with a fund crisis. But in the case of a credit card, there is no actual money being spent here. You have an amorphous credit limit up to which you can spend. You can also choose to consolidate your expenses into installments and choose to pay EMIs instead.

Credit cards can be especially helpful in case of emergency expenses. If you have an expense that needs to be taken care of immediately, just swipe your credit card without worrying whether or not you have funds available immediately. Getting bills at the end of the month helps systematize and itemize your expenses better.

2. Build your Creditworthiness

The single most important function of a credit card is that it helps you build up a credit history. Why is credit history important? Your credit history determines your credit score. It becomes an important parameter to judge your creditworthiness that is whether you will be able to honour your credit commitments. If you are planning to borrow money in the future, a credit card is a great way to establish a good record. If you are regular and timely with your payments and do not exceed your monthly credit limit, your credit score will get a boost. Your credit history with your credit card payments can be a testimony to your financial discipline. Any future loan application will likely be treated favorably.

3. Avail Reward Points and Bonuses

Credit cards come loaded with perks, reward point systems and bonuses for the cardholder. These perks can be air miles, discounts, exclusive vouchers, hotel stays, movie vouchers, etc. Consider the Bajaj Finserv RBL Bank SuperCard, for instance. It gives you up to 20,000 reward points as a welcome gift alone. Also, there is a systematic accumulation of 20 points for every Rs. 100 you spend by swiping the card. Redemption is possible against products of partner stores and service providers across flights, hotels etc.

4. Safeguard Against Fraud

In the case of debit cards, you are spending actual funds present in your account. So in the unfortunate case that there is a fraudulent transaction, you lose your money. If your credit card gets lost or is misused, you do not end up spending that money. Instead, you can report the fraud to the issuer who can then reverse the transaction immediately. By nature of how they operate, credit cards offer protection against fraud.

5. Interest-Free Credit and Cash Advances

The Bajaj Finserv RBL Bank SuperCard available on Finserv MARKETS does more than just letting you redeem your cashback offers and reward points. It also allows you to convert your credit card limit into an interest-free loan for up to 90 days. This amount can be considered just like any other short-term loan, which has to be repaid in 3 EMIs. The SuperCard also allows you to avail interest-free cash advance for a period of 50 days.

Credit cards can help you manage your finances much better and hone your financial skills better and faster. They’re a must-have instrument of payment – you save money, reap rewards, get exclusive benefits. Making payments never looked this convenient and lucrative!

How to Use Credit Cards and Debit Cards

Credit Cards:

Credit cards are much more complex than debit cards, but they make life way easier too. Credit cards help you expand your purchasing capacity, allowing you to spend more than you have. Payments are made simpler through Easy Monthly Installments, although they do charge interest after a certain grace period. Here’s a look at the best way of using your credit card.

DO’s

  • Credit cards are ideal for making online purchases. Most e-commerce sites are abuzz with offers on credit card purchases all through the year. Look for zero EMI offers to make the most of deals.

  • Pay on time: Paying your full bill each month allows you to skip the hefty interest rates that are usually charged on a monthly basis. It also keeps your credit score healthy, and that’s a real win-win.

  • You get credit card reward points for every credit card purchase. Use these points to save more when you spend more. Credit cards like the Bajaj Finserv 4-in1 Super Card allow you to save up to Rs. 55,000 annually through discounts and reward points.

DON’Ts

  • Remember to not exceed your credit limit. Paying extra interest and other fees is definitely not worth skipping the wait.

  • Never max out your credit limit either. Even if you try to pay it off monthly, it damages your credit score and can be a red flag for potential customers.

  • Having more than one card makes it harder to track your limits and dues. Open too many credit card accounts. Keep one or two cards that you use and payoff each month to help boost your score.

Debit Card:

The key aspect of debit cards is simplicity. Linked directly to your current or savings account, the debit card is an easy and secure way of accessing your money digitally. It enables transfer from your account to another, when you make a purchase or send money to someone. Debit cards are ideal for day to day transactions as they allow you to keep a record of your purchases.

Paying recurring expenses like grocery shopping and gas bills through your debit card enables you to track and analyze budget. Debit cards enable swift payments of enormous sums of money, so you don’t need to keep cash or your cheque book handy.

Debit cards also double up as ATM cards, giving you direct access to cash literally anytime, anywhere. The ease of access along with the enhanced security make debit cards a must have in your wallet.

Word of caution:

While debit cards are secure, one must be very cautious of fraud. Since debit cards are directly linked to your bank account, your bank information can be stolen. So be wary when paying, and never share your PIN or other bank information with anyone.

Another thing to remember is to make sure you have enough money in your account before transacting or you’ll be charged additional overdraft fees.

So now that you know the pros and cons of each card, you can use both to the best of their abilities. After all, why choose between two great options, when you can enjoy both.

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