differance between credit card and debit card

What are Credit and Debit Cards and Which One is the Best?

Despite the huge difference in a number of credit and debit cards in operation, total amount transacted via credit cards at POS terminals grew by 30.2% reaching a figure of Rs.61,258 crore by May 2019, while the amount of debit card POS transactions grew at a rate of 23.2% to reach Rs.57,652 crore.

This data indicates that even if there are fewer credit cards than debit cards, transactions using the former are higher.

Credit cards have become the go-to financial tool for financial transactions. It is vital for every individual to have a proper idea of how both these cards can be best used and which is the more beneficial or versatile.

What is a debit card?

Debit cards are payment cards using which you can withdraw cash, make payments for any merchant service or product, etc.

The only difference between a credit card and debit card is that the user can utilise only the amount which is available in their savings/current account. A debit card can at best be considered as a tool to access available funds in an account.

Unlike a debit card, a credit card offers a line of credit to the user and is not related to the funds available in the user’s bank account.

What is a credit card?

It is a payment card issued to an individual, using which they can make a financial transaction against a line of credit provided by the financial institution.

The payment is made by credit card lender at the time of purchase, which is the amount borrowed by consumers through credit cards.

Users need to repay the dues reflecting in the generated bill for a billing cycle within the grace period as mentioned by the financial company to avoid attracting interest rates on unpaid dues.

Which is best between credit and debit cards?

Debit cards are only plastic cards which can be used to access already available funds in an individual’s account with a financial institution.

A credit card offers a far more diverse range of functionality other than the fact that it offers access to credit as issued by the financer.

Functional benefits include –

  • Convert big purchases into easy EMIs

Using debit cards, an individual has to pay the entire amount in one go which makes the purchase difficult and may put financial strain over the month. This isn’t the case with credit cards as an individual can convert their credit card purchases into easy EMIs and pay conveniently.

  • Welcome bonuses

Individuals who are aware of what is a credit card also know that it offers a welcome bonus to new users. New credit card users are offered with several such benefits. Credit cards like the Bajaj Finserv RBL Bank SuperCard can provide a welcome bonus of up to 20,000 bonus points.

  • Rewards and cashbacks

Even though few debit cards have the option to collect reward points and availing cashbacks, credit cards come with a much larger sum of such offers. Reputed credit card lenders offer cashbacks for purchases and payments.

All credit card users need to know is how to redeem credit card reward points for vouchers, discounts, cashbacks, or even cash.

  • Avail personal loan against credit card

A major difference between a credit card and debit card is that leading credit cards come with the feature to avail an emergency personal loan against the unutilised cash limit. An individual can utilise the amount so availed at the time of emergency conveniently.

  • Security against fraud

It is important to know what is credit card as acquiring one can save an individual against fraudulent transactions.

A credit card borrower doesn’t have to pay for any fraudulent transactions made using their card if they report the issue to the concerned financial company at the earliest.

Debit card transactions are direct transactions of a sum of funds. However, credit cards are not so and the user can be reimbursed with the funds related to such transactions.

Subsequently, candidates must evaluate these options along with their spending habits to decide on which is the best card for them. Keeping these points in mind will help in making the best financial decisions.

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