‘It’s the same old story – a fight between Credit Cards and Debit Cards’
There are those who believe Credit Cards are God’s gift to earth; there are those who have sworn fealty to Debit Cards. So which is the better option? The Rick to customer’s Ilsa ? Well, let us look at the ‘yay’s’ and the ‘oh god no’s’ of Debit Cards and Credit Cards in India!
Simply put, Debit Cards are plastic cards that allow customers to access or transfer money from their bank accounts while purchasing anything. The Debit Card is issued from the bank that users can access their money from. For example, if customers have an account with ICICI bank and they utilise the amount in that account, then the Debit Card that is being used to do so is issued by ICICI bank.
Apart from the spending bit which is the best part of all cards, customers can keep an eagle-eye on their purchases and track their spending. This is boon for all those users who regularly channel their inner Rebecca Bloomwood and cannot put a cap on their expenses.
In addition to this, there is no extra fee or charge (that seems to appear from nowhere) applicable on extravagant purchases, because well, customers cannot spend more than they have!
So if they want to buy their Chanels and Guccis and Manish Malhotras, then they will have to have sufficient amount of money in their bank accounts. However, in the event that they do spend more than what is available in their account, an overdraft fee is charged. This is the amount that the bank imposes when customers have an “oops” moment and an amount not available in their account is charged to their card.
Debit Cards provide funds immediately and can be availed easily as well. Certain banks also provide Debit Cards for free when customers open a savings account with them (God bless their souls!).
Oh God No!
Internet scams are popping up faster than pimples at puberty! There are instances of unwary people being scammed left, right and centre and since debit transactions result in immediate access to finances, customers must be extra vigilant while using their Debit Cards for online transactions. This is also the case if customers lose their card, and unless they notify the bank authorities immediately and get it cancelled, they might as well kiss the money in their account goodbye!
Another not-so-good part about Debit Cards are that they aren’t accepted everywhere, especially in small and certain medium-sized shops and only cash is the way to go. At certain times, if a Debit Card is used to withdraw cash from an ATM that is affiliated to another bank and not the one that has issued the card, then a fee is charged. The amount may seem small, but beware! It may add up to a substantial amount in the long run.
Now for the other side of the story: Credit Cards allow users to procure a certain amount of money from the issuer up to a predetermined limit. Customers are required to pay the amount they spent as the bill amount at the end of every month. A certain minimum amount is applicable as part of the bill and failure to pay this results in a penalty. Credit Cards are essentially a type of loan that customers avail.
Credit Cards offer more financial flexibility and come with a grace time-period. Customers have the option to spend more than what they have as the amount that they spend comes from the issuer and not their own bank account. Credit Cards are also helpful for customers looking to purchase something that they cannot afford to in one go. Yes, Chanels and Guccis are possible (finally)!
Credit Cards also come with additional perks and benefits. These deals can range from lifestyle perks to dining privileges.
These are also secure and transactions with Credit Cards are not very risky. Even if users become victims of online frauds, they will be able to reverse this by quickly notifying the bank and having the Credit Card deactivated.
Credit Scores can be built up through judicious use of Credit Cards which will later aid customers if and when they would like to procure loans.
Oh God No!
Misuse or irresponsible usage of Credit Cards can result in customers falling into the merciless hands of debt very quickly and coming out of this is easier said than done! This is because if customers do not pay their bills on time, an additional penalty is charged which ensures that their debt amount rises. This is also the case when users exceed the limit on their Credit Cards.
Plus, debts result in unfavourable credit records and scores which hampers the customer’s financial flexibility and stability. Remember Rebecca Bloomwood’s situation? Something similar, and no, that is not a good position to be in!
Now that both sides of the argument have been discussed, it is up to the users to decide the card that is going to change their financial lives. Debit Cards or Credit Cards? The choice is now theirs.
‘Of all the gin joints in all the towns in all the world, she walks into mine – with Credit Cards or Debit Cards, is her choice’.
Additional Reading: How to know if your Credit Card has been hacked