Are Credit Cards better than Debit Cards?

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Credit cards and debit cards have reduced the dependency on hard cash and have eased online, contactless and even offline transactions. Thereby, most of us, whether salaried or self-employed, have at least one of these cards. While debit cards are used to access the funds available in your bank account, credit cards allow you to make high-value purchases on credit and repay later. Additionally, credit cards offer multiple advantages like rewards, cashback, lounge access, insurance covers, etc. which are usually not available with debit cards. To understand the benefits of credit cards over debit cards, let us first understand the basic differences between a credit and a debit card.

Meanwhile: Check Best Credit Cards in India

Difference between Credit Cards & Debit Cards

Criteria	Credit Cards	Debit Cards
Meaning	Short-term credit offered by a card issuer that requires repayment	Offers access to the available funds in your savings or current account
Application	Can be applied even when you don’t have a bank account with the card issuer	Offered along the savings/current/salary account
Limit	As per pre-fixed credit limit by the card issuer	Up to the balance available in your linked savings/ current account
Repayment	Involves repayment by the due date	Does not involve any repayment
Interest Charges	Includes interest charges only in case of late payment	No interest charges
EMI Option	Usually offered on all transactions above Rs. 2,500	Offered as per vendor-bank agreement
Credit Score	Direct Impact	No Impact

Based on the comparison between credit cards and debit cards, you must note that credit cards can be a better choice than debit cards due to the following reasons:

 

1. Credit cards can be availed without a bank account

 

Since a debit card grants you the access to the funds in your bank account, it is only issued when you hold a savings, current or a salary account. For credit cards, instead of a bank account, you must have a good credit score and history. Some card issuers also offer credit cards to those who are new to credit. Credit cards give you additional purchasing power, which allows you to make purchases even when you do not have enough funds at hand along with offering a financial cushion in case of emergencies. 

 

2. Credit cards help you build your credit score
   
   Debit cards are not a credit instrument, thus, they do not add up to anything in your credit history. Credit cards, on the other hand, can impact your credit score directly and help you build a good credit score if you pay your card bills on time and in full, and maintain a good credit utilization ratio. For those who are new to credit, getting a credit card and using it responsibly can go a long way in building credit which, in turn, makes availing other forms of credit easier.

 

3. Extensive rewards & cashback benefits

Though debit cards also offer rewards and cashback on your purchases, the range of these benefits is extensive in case of credit cards. For instance, SBI Platinum Debit card offers 2 SBI Rewardz points for every Rs. 200 spent on shopping, dining, fuel, travel booking or online payment, whereas, SBI Simply CLICK Credit Card offers 10 reward points per Rs. 100 spent on online purchases made on selected brand and 5 reward points per Rs. 100 spent on all other online purchases. The range of these rewards could be even higher in case of cards that offer incremental rewards, such as IDFC FIRST Millennia Credit Card offers 10X rewards for spends above Rs. 20,000 per billing cycle, with unlimited reward points that never expire. 

Additionally, credit cards also benefit you with discounts, complimentary memberships, lounge access and more. For instance,  HDFC Millennia Debit Card offers 4 Complimentary Domestic Airport Lounge access annually, but HDFC Millennia Credit Card offers 8 Complimentary Domestic Lounge Access in a year. If you are opting for a card to solely earn rewards and other such benefits, credit cards could any day serve you better in comparison to debit cards.

Also Read: 3 Strategies To Get Lower Credit Card Loan Interest Rate

4. Better chances of savings

In comparison to debit cards, choosing the right credit card as per your spending habits and patterns can help you save a lot. While most credit cards offer rewards or cashback in general, there are different types of credit cards inclined towards rewarding you for specific categories. These include credit cards for air miles, fuel, travel, shopping, online shopping, etc.

One example on how to choose the right card would be to choose a travel credit card if you frequently travel. If you specifically travel domestically you can choose a card offering domestic lounge access benefits, railway surcharge waivers, hotel memberships, etc. However, if you are keen on traveling internationally, you must check if the card offers international lounge access, or charges a low forex markup fee. Additionally some cards also offer benefits inclined towards popular brands.

This card variation and choice is limited in case of debit cards, thereby the chances of saving and maximizing card benefits are limited. Choosing the right credit card and making the best use of available redemption options can help you save more. On choosing a credit card that matches your spending patterns, the more you spend, the more you earn. 

 

5. Credit cards are safer in comparison to debit cards

In comparison to debit cards, credit cards often come along better safety parameters with purchase protection covers, zero lost card liability etc. Thereby, in case of lost/stolen cards or unauthorized transactions, your liability towards fraud transactions remain zero. Note that when a credit card is used, the funds are not directly deducted from your bank account, thus, no direct loss of funds in case of card misuse. Even when a transaction is made inappropriately, you have enough time to report it until your card statement arrives. With debit cards, when the card is misused, there is a direct deduction from your bank account, thus, immediate fund loss.

In either case, it is advisable that you report your credit card/debit card loss or damage immediately to the card issuer/bank by contacting the respective customer care.

As seen above, credit cards come with a more extensive range of benefits and you must own a card that matches your spending patterns. You can earn generous value back on your frequent purchases and, with responsible usage, build a good credit score.

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