Credit Card vs Debit Card: Which is Better?

Credit Card vs Debit Card
Credit Card vs Debit Card

Credit Card vs Debit Card? A question that a lot of you might have in mind. A credit card is a relatively new financial instrument, especially for the Indian market. In fact, in a market of over 1.3 billion, only about 65 million credit card accounts exist. Compared to that, India has well over 800 million active debit cards. In case you are on the debit card bandwagon, which is increasingly crowding up, we wish to guide you on why switching over to a credit card, for your payments, makes better sense.

We shall also discuss some of the best credit cards that offer you value and safety, so you can get the one that suits your needs best.

Credit Card vs Debit Card: What are the major differences?

Before we jump into why a credit card wins in the credit card vs debit card debate, let us clear out the basic differences first. A credit card is a sort of unsecured loan that a bank offers you in the form of a physical or virtual card (some banks offer secured cards in rare instances). Available in metal or plastic forms, these credit cards usually come with a monthly credit limit, of say Rs 10,000, which indicates the amount of debt you can take from the bank given you repay it within 15-20 days after the 30-day billing cycle. Here you can also check credit card fees and charges & apply for a new credit card.

A debit card, on the other hand, is just an extension of your savings/current account with a bank. Suppose you have a savings account with a certain bank with an amount of Rs 1,00,000. The bank will extend you a physical or virtual debit card that you can use to pay online or offline or to withdraw money at an ATM.

So, essentially, these are two completely different products with a similar goal – to make payments. Read further to find out how making payments with a credit card has multifold benefits.

1. Fraud and purchase protection

One of the biggest differentiators for a credit card is the element of fraud protection. A credit card is essentially borrowed money from the bank until you pay it off. During the lending period, in case your credit card is involved in a fraud transaction, the bank will use its resources to recover and reimburse you the loss in a lot of cases. Here you can also check what is credit card debt trap & how you can prevent it.

This also works with purchases. Certain credit cards offer warranty and purchase protection to the point that they cover you in case a product you bought goes bad after its warranty service is over. The company can also help you reverse certain charges to your card in case of genuine cases. All in all, you get a solid support system for your payments.

2. Cashback and Rewards

Another big reason why credit cards trump debit cards is the fact that they offer certain cashback and reward points that give you some sort of return on your expenses. For instance, the Axis Flipkart credit card offers you 5% flat cashback on all your purchases on Flipkart. Suppose you purchase a refrigerator, worth Rs 50,000, from Flipkart via the Axis Flipkart card. You will get 5%, which is Rs 2,500, right back in your credit card account!

This means that the refrigerator cost you just Rs 47,500, and this is exclusive of the e-commerce deals and discounts that run regularly. That, separately, can give you another Rs 1,500-2,000 off on a lot of big purchases when you buy during Diwali, New Year, Holi, and other sale seasons.

Reward points are another currency in which you can get some money back. The SBI SimplyClick credit card, for instance, gives you 1 reward point for every Rs 100 spent. It also gives you 10X points on certain categories and platforms. You can go on accumulating these reward points to ultimately redeem for cash, gift vouchers, or even airline miles.

Talking about miles; this is a sort of reward you can link with airlines like Vistara, Air India, and Emirates among others to get discounts on your flights and/or free flights! Every credit card has its unique reward/cashback offering.

3. Credit Score

A credit score is an aggregate score of your lending history, which decides your future credit card and loan approvals. If you are in your 20s or starting your career, you might not pay too much heed to your credit score. But if you have an upper hand through a robust score, approvals for your home loans, education loans, and car loans in your late 20s and 30s will be much easier.

It is treated as the holy grail by banks and NBFCs when issuing cards and loans. Getting a credit card early on, and maintaining a healthy repayment history, ensures your lending experience in the future remains smooth.

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