Debit Card or Credit Card? Which One is Ideal for You?

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The choice between using a debit card or a credit card is essentially based on your belief about using credit or your own funds to meet your expenses. While using your own funds is always simple and wise, the multiple advantages offered by credit cards cannot be denied. A credit card proves to be incredibly useful when you do not have adequate funds in your bank account or debit card to fund an urgent expense or make a purchase or pay your bills. Here we discuss the difference between debit and credit cards and factors that play a key role in choosing between them

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Understanding the Difference Between Debit and Credit Cards

On the first appearance both the cards look identical with their card numbers, expiry dates and PIN codes. Both types of cards can be used to do shopping, pay your bills, or make any other payment. However, there is a major difference between the two. While the debit cards make your payments by drawing the money from your own money deposited in the bank, credit cards allow you to borrow the money up to a certain pre-decided limit from your bank. So, when you use a debit card, the money gets instantly deducted from your own funds. But when you use a credit card, you are using the bank’s money which you need to repay by the due date which depends on the credit cycle of your credit card.

Another key difference between the two types of cards is the fees associated with them. While debit cards do not involve any fees, credit cards involve annual charges, interest rates on the overdue amount and other charges like foreign transactions. So, when you apply online for a credit card do check the charges involved.

Benefits of Using a Credit Card

Credit cards not only expand your purchasing power but are quite convenient to use. They are quite cost-effective if you repay the used money by the due date and do not attract any kind of interest charges. Some benefits of using a credit card to fund your purchases or other expenses are:

  • Build Credit History – The use of a credit card and your record of repaying the due amount gets reflected in your credit scores. On-time payments and low credit utilization help you to build a good credit score which enables you to get a personal and other loans at a later stage.
  • Offer Easy Access to Credit – When you use a credit card you are getting access to credit that can help you fund items that you otherwise may not be able to afford immediately. Using a credit card gives you time to arrange the funds and repay them by paying the due amount on your credit card account.
  • Reward Points – Credit card usage is not only convenient but rewarding too. Credit card companies offer their users a lot of reward points that can be converted into cash backs, attractive offers and discounts at various shopping outlets or brands. A cashback credit card is useful and rewarding.

Credit cards do offer several benefits but only if used wisely and in a disciplined manner. Excess usage of credit cards and laxity in payment of the due amounts can lead you to a debt trap. And if you are not disciplined, it is better to go for debit cards.

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