Why are credit cards better than debit cards?

Business

17 Jul 2018

#FinancialBytes: Why you should choose credit cards over 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.

Reason #1

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

Credit 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.

Reason #2

Credit 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.

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Reason #3

Credit cards do not make your money vulnerable to frauds

Credit 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 #4

Credit 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!

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Most asked questions

How is the Axis my zone Credit Card?

What would be the transaction charges?

Can I pay the amount from one credit card to another credit card to pay the due money?

More questions

How is the Axis my zone Credit Card?

Asked 2018-07-17 19:07:37 by Devendra Tripathi

Answered by NewsBytes

Axis My Zone Credit Card is among the most used credit card rated 'excellent' by users. It offers exciting rewards and perks even for a minimum transaction. Its one-year fee is Rs.500.

What would be the transaction charges?

Asked 2018-07-17 16:05:15 by aditya raja

Answered by NewsBytes

The transaction charges differ for different credit cards. The credit card of each company will charge a different amount as the transaction fees. It also depends on the amount transferred through that credit card.

Can I pay the amount from one credit card to another credit card to pay the due money?

Asked 2018-07-17 11:22:21 by pramila nikku

Answered by NewsBytes

Yes, you can transfer the money from one credit card to another credit card to pay all overdue amount. You can do this till the amount overdue in your previous card is less than the maximum limit of your new card.

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