This article highlights the differences and comparative advantages and disadvantages of the two types of popular plastic money on offer in India.
The basic difference between the two is the fact that a credit card takes the form of a personal loan from the issuing bank to the consumer, while a debit card is more like a cheque: money is directly deducted from a person’s bank account to pay for transaction.
Some advantages of a credit card over a debit card are:
With a flexile spending limit, a cardholder can take advantage of the easy loan facility of a credit card, and can use it to purchase items or spend money that he expects in the near future, not just money that he presently has in his account.
Most of the major features of a debit card such as withdrawal of cash from ATMs are available on credit cards as well.
A credit card has a wider acceptance and recognition, especially in online transactions.
A credit card has greater security measures ad checks than a debit card.
Credit cards allow for cash back and bonus points schemes that a debit card is not eligible for.
A credit card can be used as a convenient way to check and record your spending.
Since there is a fixed credit limit, a cardholder cannot overstretch his purchases
The disadvantages of using a credit card: Following are the disadvantages of Credit card
The major one is the hidden costs of a credit card in the form of late payments, transaction fees, fuel surcharge. The consumer must take all of this into account before getting a card issued.
It is not compulsory for the entire balance to be paid, but the interest is charged on the entire amount, regardless of the part paid. This causes a debt trap for the cardholder.
The security of a card is not total and cases of fraud are extremely common even today.
Credit cards can be used at ATM cards, but there is a considerable processing fee required.
All in all, a credit card should be used responsibly and the amount due should be paid in full.
Debit cards provide access to ready money in a more convenient and less invasive form than cheques, and allow for a faster withdrawal of cash.
They can be used by people who do not qualify for a credit card, and the major advantage is that a person spends money that he actually possesses from his bank account.
A debit card can be used to withdraw money from an ATM with no processing charge. A debit card is a more convenient way of carrying cash around.
The disadvantages of the debit card:
There are almost no security measures and a person can use a debit card to clean out the cardholder’s account, if he knows the PIN.
A debit card does not prevent the account from being overdrawn, and has less affordability than a credit card.
A debit card also has a narrower acceptable area in India, with many merchants not accepting it since they are charged a fee every time they do.
The major problems of a debit card are negated by instant notifications of transactions via sms and emails. A credit card or a debit card are both useful tools that must be used carefully and sparingly to maximize your advantage.
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