Debit cards better than Credit Cards

Aniket Sinha, a young techie, gets confused every time he opens his wallet to make payments after a shopping spree. Giving little thought to pros and cons of credit card/debit card usage, he finds both to be convenient modes of payment. He has no idea as to which would be beneficial for him more.

Are you also one of those who believe that both credit cards and debit cards serve the same purpose?

Credit and debit cards may appear similar in looks but they are different when it comes to usage and services offered.

Advantages of using debit card

As the name suggests, when you use debit card to make payments, the specified amount gets debited from your account. Here are a few advantages of using debit cards:

  • Carrying a debit card saves you from the inconvenience of carrying cash and cheques. It is more like using real money without physically carrying wads of currency notes.
  • You can use debit card while shopping, eating out or availing other services. Debit cards are widely accepted. Whenever you need cash, you may also withdraw money from ATMs.
  • As you cannot use your debit card to borrow or make purchases on credit, it helps you in maintaining financial discipline. You will, therefore, buy only what you are able to afford. It is the best way to control spending if you are a compulsive spender or a shopaholic.
  • Unlike credit cards, you make payments on the spot and the transaction is settled then and there. You will not have to worry about making any payments in future or paying penalty and high interest if you fail to make payments in time.
  • If you are a frugal spender and make it a point to follow monthly household budget, debit cards are just the right choice for you.
  • There are no extra costs involved in debit card transactions. There is no fee on the use of debit cards unless you spend more than what you have in your account. In you overdraw, you will have to pay an overdraft fee.

Why not use credit card?

Credit cards come with a lot of advantages and facilities for customers. But if not used wisely they may also prove to be a curse. Here are a few issues that a credit card user may face:

  • If you choose to pay your credit card bill in parts, you will be charged high interest on the outstanding amount.
  • Credit cards generally come with annual charges, late payment fee, penalties and high interest on outstanding dues.
  • Credit card can prove to be expensive if you are a compulsive spender. You may tend to spend more if you use credit cards as you have high credit limit at your disposal.

Debit Card vs Credit Card

Debit Cards

Credit Cards

About the facility

When you use debit card, money is deducted from your bank account.

Using credit card is like taking a loan. You are expected to repay the amount in full within the grace period otherwise interest is levied on outstanding due

How much can I spend?

As it is linked to your account, you can spend whatever you have in your account

The limit set by the bank or institution concerned. Limits depend on creditworthiness of the borrower.

Interest

No interest is charged.

If the dues are not paid in full, very high interest rates up to 40-45 per cent are charged

Credit history

No impact on creditworthiness

Used irresponsibly, default on credit card dues can affect your credit rating

Other charges and penalties

No

Yes

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