What to Choose, Debit or Credit Card ?

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It is regular for us to receive calls or e-mails from banks to buy credit cards of their respective banks. Bank in which we hold our bank – account already provides us with a card, ‘ATM cum Debit’ card and makes us count bountiful benefits of doing shopping using it.

Confusion arises when the same bank still calls us to take its credit card to enjoy hassle-free shopping. Also, when we shop using a plastic card, a shopkeeper often asks whether we’d like to run a credit or debit card. It clears at least one thing, whether it is a credit or debit card, both Plastic cards have their acceptance at the same place. Then, how both cards differ?

The choice that we make decides how transaction will proceed, who will pay the bills, how long it will take and what rights we will get. Though debit and credit cards seem similar, they both differ in the services offered by them and the way they work.  Let understand both Plastic cards closely.

Debit Cards

The meaning of ‘Debit’ is deduction. Debit cards work as their name means.  Money is deducted from our bank- account instantly, the moment we purchase goods or withdraw cash (acting as an ATM card) using them. Since money is automatically taken from the account, we must have funds in our accounts to use them. To use this card, we typically need a PIN (personal Identification Number).

Credit Cards

As its name say, it provides us credit to make purchases. It’s a kind of loan, a credit facility. With the card we can purchase goods, up to a preset limit. And we pay bills for purchased goods on a later date. Cost of purchased stuff gets added to the credit–card account and at the end of every month; we receive a statement indicating the cost of purchased amount. Here, we enjoy a choice. We can  either pay off the bill completely by a given date having no burden of paying interest. Alternatively, we may choose to pay some amount of bill and paying the rest in the form of monthly installments. The latter choice costs us a bit, as interest is added on the balance amount.  Quicker the payment we make, lesser the interest is charged.

Puzzle is still unsolved!

You must be wondering when both cards are swapped in the same manner, wear similar look…then, which is a better option to go with? Let try to crack this mystery by counting benefits that a debit card offers over a credit card and vice-versa.

  • With debit cards, you can not only do shopping but can also withdraw cash from Automated Teller Machine (ATM).
  • It is often for women to lose track of spending and go extravagant when they are in shopping spree. Thanks to Debit card! It will limit them to overspend.

If you suffer from impulse buying, I suggest you to stay away from credit cards as you will end up owing a huge credit.

  • No fee is charged in using a debit card unless we break the terms and conditions of the card. Credit cards carry many charges. Along with annual fees, there are several hidden fees such as late fees, over-limit fees, balance transfer fees, and card replacement fees.
  • Since the competition is heating up between banks, banks have started coming up with several ‘Automatic Saving or Rewards Programs’ to attract customers. So, enjoy cash-back facility on purchases and benefit your saving account over time.

Now, I take you to the benefits that a credit card offers you over a debit card.

  • With a credit card, you can enjoy shopping without botheration of having money in your bank account. No bank balance in account means no purchasing in case of debit cards.
  • Credit card facilitates you to purchase items that you need, even if they are beyond your budget. Certainly, a Blessing! ‘Overdraft’ facility is available with debit cards but hefty amount is charged for going beyond the balance. So, think twice to seek this pricey facility.
  • Enjoy benefits, such as free insurance, cash back, free flights, score points, etc provided by banks for using credit cards. Rewards of Debit -cards are not as valuable as that of credit cards. You miss out on these perks if you opt for a debit card.
  • There are some credit cards that don’t carry annual fees. Pay in full the complete balance every month and avoid expenses, such as interest payment and penalties! Thus, get yourself off the hook.
  • At some places, only credit cards are allowed for purchasing. Wider acceptability of credit cards will make your shopping smooth and fun.
  • Credit cards offer a convenience of partly or full payment. It is thanksgiving for card holders when the purchased item is defective or faulty. Merchandise payment can be abstained in this case.
  • The card offers absolute fraud protection. Victims of credit-card fraud do not suffer from fraudulent charges. If you are a debit card user, then you need to be more cautious as debit cards are more to fraud during online shopping. Frauds are common if expiration date, security code or debit card number of the card goes into wrong hands.
  • It is easy to keep a record of purchasing with credit cards as users receive credit-card statement every quarter or month. No such monthly statement facility with debit cards, hence you yourself have to keep track of your spending.

Final Word

Choose whichever channel that can help you the best to manage your hard earned money. But, do realize that a credit card favors more. No doubt, the risk involved overshadows its benefits; hence I am not recommending you to use it. But, I would like to close this article by prompting you to take an informed decision. Understand the differences well; compare the cost of making cash- payment versus either a debit or credit card. Understand and only then make a choice, after all ‘Choice is Yours’!