Every time you use a credit card, you actually are borrowing money that is made available to you by a bank or other financial institution. The institution pays the debt to the vendor and, in turn, you pay the money back to the institution. By signing up for a credit card, you agree to pay back the money that you borrowed, in addition to any interest drawn on the amount you borrowed
A debit card is directly linked to your bank account. It works very much like paying cash or like writing a check. If you want to buy something for Inr100, you have to have Inr100 in your account. When you swipe your debit card and enter your PIN to purchase something, the money is electronically deducted from your account. Depending on your bank, the transaction may or may not show up immediately, however the funds will be immediately “held” and that hold will be reflected in your available balance.
Both credit as well as debit card offer a list of advantages as well as disadvantages……
Credit cards allow you to spend money without carrying a lot of cash around and without writing a cheque. They’re extremely convenient, especially when you´re on a trip or don’t have access to cash. Besides, most of the online transactions can be carried out only through credit cards and not cash.
The main difference between a debit and credit card is that when you use a debit card to buy something, the money comes out of your current account. You won’t be charged interest unless you have gone into your overdraft. With a credit card, you are borrowing money, and will be charged interest on what you owe if you don’t clear your balance each month.
However, when credit cards are abused by being used too often and purchasing items that are extremely expensive, consumers can get themselves into a heap of financial trouble. The most common problems that people have with credit cards are that they charge much more than they can afford, and become severely in debt. It can take some people years to recover from high credit card balances. A good alternative for individuals who either have bad credit or who do not want to own the responsibility that comes along with a credit card are prepaid charge cards or debit cards.
The basic concept behind a prepaid charge card is that it does not allow a person to spend money they do not have, while still providing the convenience of the small, rectangular piece of plastic that is so much more convenient than cash.
Some credit cards offer warranty benefits on purchases made with them. This can be very useful with big ticket items such as appliances, TV’s, lawnmowers, etc. Some of these even last up to two years after the manufacturer’s warrant expires. Often this can allow one to forego the manufacturer’s warranty, saving that extra expense.
Sometimes the warranties offered by credit cards are automatic, and sometimes they have to be applied for, depending on the card. Debit cards do not typically offer warranties.
If you lose cash, it’s gone. If you lose your credit card, there are additional layers of security to protect your money. Anyone who finds your card either needs to impersonate your signature or know your PIN number. Plus, as long as you notify your bank, you’re not liable for any purchases made on your card after it was lost.
Some credit cards also offer inclusions such as travel insurance, purchase security or extended warranty protection.
Interest and debt:
Many people are wary of getting into debt, and worried about the money they could waste on interest with a credit card. In such cases, it is usually better to stick with a debit card. While a credit card can be a great tool, and you can avoid interest by paying off your balance each month, many people find the allure of credit cards too great, and find themselves slowly falling into the debt trap. Using a debit card can help you avoid that altogether, requiring that you only use money that you have.
Although credit and debit cards function in a similar way and can not guarantee 100% security credit card holders can easily challenge unauthorized transactions while debit card users are very likely to stay liable. So, if you are still using your debit card for purchases may be it is time to fill out a credit card application and protect your money.