Which is Better: a Debit Card or a Credit Card?

difference between a credit card and a debit card.
difference between a credit card and a debit card.

During the pandemic of 2020, and as it continues into 2021, the use of credit cards and debit cards increased manifold. While more Indians prefer debit cards, as they offer a convenient way to pay with no outstanding payments to be apprehensive about, credit cards are being viewed positively, for the many schemes and rewards they yield.

 It took a while for Indians to switch to plastic money of any kind, whether credit cards or debit cards. The trend of paying with plastic seems here to stay now. People in India are slow to change, and the transition from the traditional cash habit prevalent for so many years took time to break. Break it did, when demonetization occurred. 

The Reserve Bank of India has prompted credit card use with new guidelines for safety, claiming that transactions are done digitally to promote transparency in finances. While banks make credit cards tempting for users, many people lack knowledge about the difference between a credit card and a debit card. It’s important to be aware of the way in which both are distinctive before you decide to use either or both. 

Credit and Debit Cards: Differences

While both cards look identical to laypeople, with card numbers that are 16 digits long, dates of expiry, and both with personal identification numbers (PIN) to operate, they are distinctive in their use. Both make it easy to purchase goods and are convenient to carry.

The main difference between a credit card and a debit card is that credit cards let you borrow funds from the issuer of the card (a bank or financial entity), while debit cards permit you to spend money by using your own funds in your bank account. Knowing the differences between the two can help you understand how to decide to use each one. Deciding which is best depends on how you wish to use both cards. 

Main Differences

Credit cards are issued by banks and financial institutions and let people borrow money from the issuer, offering the user a line of credit of 45 to 55 days, after which the user has to pay back the money borrowed in full, with interest, depending on the terms laid down by the card issuer. Debit card payments are made directly by drawing funds from the user’s bank account.

The upsides of credit cards are that there are different types for different user preferences. For instance, there is a credit card, such as the SBI Elite Card for travelers, and it may be linked to discounts on airfares and hotels.

 The best credit card for online shopping may be the ICICI Bank Amazon Pay credit card that gets you deals while you shop on the e-commerce portal. Debit cards may be linked to offers on certain brands too, but credit cards offer rewards while you purchase goods, and these can be exchanged for cash. Nonetheless, a credit card acts as a loan card, and a time comes when you have to pay it back.

Credit cards come with cash limits beyond which you cannot spend. In case you fail to pay your credit card bill, you incur interest and penalties, plus you collect a debt and become a defaulter.

This, naturally, doesn’t happen with a debit card, and spending funds is done in a more disciplined manner. Credit cards also come with interest and fees. In case you use it to withdraw cash at an ATM, you will be levied a financial charge. Debit cards may be used free of charge at the issuing bank but may incur a fee at the ATM machine of other banks. 

The Credit Card Advantage

While debit cards can be restrictive in that you can spend the funds that are in your bank account only, credit cards let you afford high-end products on EMIs, which may incur zero interest rates at times. If used responsibly, credit cards can be a great way to get lines of credit, such as via the Bajaj Finserv RBL Bank SuperCard. This is a credit card with multiple uses and acts as an ATM card, a  loan card, and an EMI card. Get loans for up to 90 days, and withdraw cash from ATMs free of cost for 50 days.