The debate over whether to use a Debit Card or a Credit Card refuses to die down. Both these forms of plastic money have become an essential and indispensable part of our lives. They have made our lives so easy and hassle-free that carrying or using cash for our daily transactions is almost a thing of the past now.
So is it better to swipe your Debit Card or your Credit Card at a store? Ever wondered about the difference? Well, let’s help you clear your doubts and spell out the pros and cons of swiping your Debit Card or Credit Card.
Advantages of Debit Cards
Debit cards are linked to our Savings or Current accounts. So, here are some of the advantages of using your Debit Card when you shop:
- Fees: When you use your Debit Card for all your transactions, you need not bother paying any kind of annual fee. Debit Cards are always free and do not incur any charges unless you use the overdraft facility on your savings account.
- Controlled spending: You can never lose track of your with a Debit Card since it will not allow you to swipe unless you have money in your Savings or Current Account. Only some banks under special circumstances allow an overdraft limit on Debit Cards, which is chargeable.
- No interest: Since you cannot carry any balance amount, you need not bother about paying interest on your Debit Card purchases. All your transactions are paid upfront.
- Limited liability from theft: Debit Cards have a limited liability from theft since most cards have a limit on the amount the card holder can withdraw. Also, the card’s PIN enhances the overall security of a Debit Card.
Disadvantages of Debit Cards
- Reduced reward benefits: The reward point benefits earned on your Debit Card transaction are much lower than that of a Credit Card. Also, most Debit Cards do not offer any kind of reward points for daily transactions.
- No Credit Score help: If your credit history is less than desirable, spending money on your Debit Card will not help you build your Credit Score. Remember, a bad Credit Score means additional problems while applying for a loan.
- Balance check: If you use your Debit Card frequently, then you always need to monitor your account balance closely. You cannot afford to spend more since you will incur heavy overdraft charges in case you overspend.
Advantages of Credit Cards
Though Debit Cards and Credit Cards look identical, there’s a lot of difference between the two. You’ll soon realise these differences when you swipe your Credit Card frequently:
- Reward points: Cashback points, free air miles or additional reward points are some of the lucrative options you get only when you spend on your Credit Card. These reward points can be redeemed later.
- Building Credit Score: If your credit history has not been up to the mark, one of the smartest ways to rebuild your Credit Score is to use your Credit Card more frequently. Your timely bill payments will help you improve your score drastically.
- Extended warranties: Most Credit Cards can offer extended warranties on different items beyond the manufacturer’s warranty.
- Better protection: The amount of protection with Credit Cards is much higher in case of a fraud, theft or duplicate charge. Also, in case your Credit Card is stolen, your liability towards any kind of purchase made with your card will be nil.
Disadvantages of Credit Cards
- Overspending: This is the biggest challenge with Credit Card shopping – keeping a tab on your spending. You may tend to overspend since you know that you can pay the money at a later date – forgetting that you will also have to pay interest charges.
- Annual and hidden fees: Most Credit Cards have annual or hidden fees in the form of late fees, balance transfer fees, or overdraft fees.
- Credit Score issues: Missing out on your monthly EMI payments for Credit Card purchases can have a negative impact on your CIBIL score. Also, if you close a Credit Card without paying the total outstanding amount, it hugely impacts your Credit Score.
- Higher transaction fees: Unlike a Debit Card, the transaction fee on a Credit Card is much higher. So you may end up paying a higher service tax if you swipe your Credit Card instead of a Debit Card.
Well, like everything else, both Credit Card and Debit Cards have their share of pros and cons. Now it’s up to you to decide whether you wish to swipe your Credit Card or Debit Card depending on your spending habits and monthly requirements.
We can only offer you some good deals on both Debit and Credit Cards!