#FinancialBytes: Why you should choose credit cards over debit cards

13 Jun 2018 | By Deepali Aggarwal
Why are credit cards better than debit cards?

On the surface, both credit and debit cards are almost identical- both are plastic money, carry 16-digit card number, expiry date and PIN codes.

The difference lies in the way they function. With debit cards, you use your own funds available in your bank accounts, but with credit cards you borrow money from a credit card company.

Here, we decode why credit cards are better than debit cards.

In context: Why are credit cards better than debit cards?

13 Jun 2018#FinancialBytes: Why you should choose credit cards over debit cards

Reason #1Credit cards give you discounts, cashbacks, rewards; debit cards don't

Credit card companies thrive only if people borrow from them and thus to attract customers they offer a variety of discounts and cash-back options when you choose to make a payment using a credit card.

Credit cards also let you earn reward points on your transactions using which you can claim free gifts, service upgrades, etc.

Debit cards rarely provide such rewards and monetary-benefits.

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Credit cards qualify for EMI options; debit cards do not

Reason #2Credit cards qualify for EMI options; debit cards do not

You can choose to make a payment in the form of Equated Monthly Instalments (EMIs) only using a credit card, as debit cards do not qualify for the EMI option.

But do remember that although EMIs help you to make a hefty payment in instalments, they are inclusive of an interest amount charged on the outstanding amount, according to your EMI tenure.

Reason #3Credit cards do not make your money vulnerable to frauds

Since with debit cards you use your own money, the maximum spending limit is your total bank account balance, unlike credit cards which have statutory spending limits.

Thus if your debit card gets compromised, you risk losing all your bank account money. However, with a credit card you don't risk losing any of your money but the maximum bank money available as credit.

Reason #4Credit cards help you build credit score; debit cards don't

When you apply for a loan, the first thing that a lender checks is your credit score. A credit score reflects your credit worthiness i.e. how good you are in paying back your credits taken in the form of loans or by using credit cards.

Thus, being a credit instrument, only a credit card helps you build your credit score and not a debit card.

Choose credit card if you can make timely bill payments

It's a fact that credit cards offer a plethora of benefits over debit cards. But it's also true that with them you borrow money which needs to be repaid by a certain date. If you falter, you need to pay late payment charges and accumulated interest. So, choose wisely!

How does the credit card issuer decide my credit limit?

Asked on 13-06-2018 by Anonymous -
Answered by NewsBytes
Your prospective card issuer, at its sole discretion, will determine the Cardmembers' limit and cash withdrawal limit. These limits are communicated to the customer at the time of card delivery. Some key factors that may influence the decision of the card issuer include customer profile, the repayment capacity and CIBIL credit report along with other internal underwriting norms.
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What should I do if my credit card gets stolen?

Asked on 13-06-2018 by Anonymous -
Answered by NewsBytes
In case you have lost your card or it has been stolen, the first thing that you should do is to block your card to prevent unauthorized transactions. You should call the card issuer's customer care number and inform them of the card loss/theft so that the card is blocked and they can start with replacement card issue procedure.
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