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  • Credit Card vs. Debit Card: Which one should you choose?

    Published on August 10, 2018

    The government has lately been focusing on transforming the economy into a cashless one. Leading this change is the increased use of debit and credit cards for purchases. While e-wallets are still relatively new, cards – both debit and credit, are more widely used.

    The similarities between a debit and a credit card are limited to both being identical to look at, coupled with PIN codes and a card number.


    The key difference

    A debit card is connected to your bank account. This means whenever you swipe the same at an ATM or make a payment with it, the amount payable gets directly deducted from the account. Hence, what you spend is dependent on the available balance in your bank account.

    On the contrary, you don’t need to have an account with a particular bank to avail its credit card. How this works is that you are first assigned a pre-determined credit limit; that is essentially the maximum you are allowed to borrow using the credit card. Every time you use the card for a purchase, that amount is subtracted from your credit limit. This amount can be paid to the lender at a later date, when the cyclic bill, or card statement is raised at the end of every month.

    Reward points difference

    To encourage the use of credit cards, most lenders offer value for money deals to their clients. They are often in the form of reward points which can be exchanged for a gift item or product. For instance, the Bajaj Finserv RBL Bank SuperCard offers several benefits to its users, such as interest-free withdrawal from ATMs, reward points, attractive discounts at partner stores, and more.

    Debt cards, on the hand, offer fewer such benefits since the user is utilizing their own bank balance to pay for their purchases.

    Interest-free period difference

    With credit cards, the amount utilized is paid only when the bill is generated, during the pre-defined time period. If you pay within this time period, then the payment is interest-free. However, on crossing this ‘due date’, you are liable to pay interest on the money borrowed.

    Such a concept does not exist with a debit card, as you are using your own money for the purchase, in real time. It is similar to handing cash to the cashier when you make a purchase. The money is immediately debited from your account.

    The EMI difference

    When you use a debit card, the expenditure amount is deducted from the available balance in your bank account right away. Conversely, a credit card allows you to break down the amount payable into easy EMIs, usually up to 24 months. Though a certain rate of interest will be charged on the outstanding amount every month, you can defer the total payable for a later date, depending on the tenor of the EMI.

    Credit score difference

    Your credit score is that vital decider that impacts your chances of getting a loan or a credit card approved. This score is set on the basis of how you’ve handled and dealt with a credit card or other credit instruments in the past.

    A debit card isn’t tracked by a credit bureau; therefore, it has no effect on your credit score.

    Choose according to your need

    A debit card allows you to stick to your budget, ensuring you spend only what you can afford. However, sometimes it may not be enough to take care of emergency purchases.

    A credit card is best used when the payment amount is large, and you may not be able to pay the entire amount at the time of purchase. In case of irregular income, a credit card can come in handy as essentials can be bought when funds are low, with the convenience of paying back the amount at a later date.



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