Can Credit Card Be a Substitute For Debit Card?



In India, the ratio of Debit Cards to Credit Cards is about 4:1 as of 2008, which shows that debit cards are much more popular. However, with rising levels of education, income and lifestyle, the demand for credit cards is increasing day by day. Credit and Debit both the Cards are plastic money that provide ease and convenience for online and offline purchases. You must be having a debit card; however, if you are thinking of going for a credit card you should read this article to find out the difference between the two.

Credit Vs Debit Card

1. Use at ATM: You can use credit card at ATM to withdraw cash but it is not advisable to avail cash on credit, as you have to pay heavy finance charges and transaction fees.

2. Spending Limit: Spending limit is a pre-set limit determined by the card issuer. In case of debit card, you can spend any amount up to the credit balance in your saving amount.

3. Charges and Fees: When you use debit card for purchases, generally, there are no charges. However, with credit card, you may have to pay finance charges if you do not pay your bills by due date. Moreover, you may have to pay transaction fees or other charges depending upon various factors. For exact details, you should refer the schedule of charges of various banks.

4. Philosophy: Debit card expects you to spend your own money. Credit card encourages you to spend on borrowed money.

5. Which card is better? If you are a care-free type of person, you should not go for credit card, as you are likely to end up paying huge amount by way of finance charges, penalties etc. You would be better off spending with your debit cards. If you are a meticulous and disciplined person and if you can plan your purchases and repayment properly, it is worth going for a credit card.

6. What are the main benefits for using credit cards:

  • Banks offer several incentives in the form of cash-back offers, reward points and gifts, among other. Every bank has its unique reward point program, where you can earn about 2 points for every Rs.100 to 150 spent by you. For instance, if you use your credit cards only for paying your monthly telephone, electricity, gas and other utility bills, say around Rs.5000, you will accumulate approximately 1200 points every year. You can redeem reward points for paying annual card fees or for various gifts. Depending upon the bank, 1200 reward points are equal to a notional sum of Rs.600 to Rs.1200.
  • Apart from the reward points, you can use interest-free money for 40-50 days depending upon the free credit period offered by the banks. You can put this money to earn interest for you.
  • Many banks offer easy EMI (Equated Monthly Installment) schemes, which are useful for buying household appliances like TV, Refrigerator, Furniture etc. For example, if you plan to buy LCD TV worth around Rs.45,000 and you do not have the required sum, you can buy it through Easy EMI schemes on your card offered by the banks. In this case, you will have to pay Rs.5000 every month for nine months, which will be billed in your monthly credit statements. Make sure that you can pay off Rs.5000 every month by the due date, otherwise you will end up paying huge finance charges. If you can not spare Rs.5000 every month for nine months, you should forget the idea of buying LCD TV.

In the End:

Debit and Credit both the plastic money have its virtues and vices. Credit Card can not be an alternative for debit card and debit card can not be substitute for credit card. Therefore, if you can manage to clear off your bills by due date, you should have credit card as an added convenience and for availing attractive schemes offered by the banks.

The Author is a Techno-Commercial Consultant and Freelance Content Writer. Get more info on Financial Awareness Portal Also visit Financial Training

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