With credit cards and debit cards, users can make payments and save on expenses. When users have money in their bank accounts, they prefer to use a debit card for making payments with that money deducted from their accounts and when they exhaust money from their accounts, they transfer it to credit cards.
If you use a credit card from the beginning, you can avail more benefits than a debit card. Let’s take a look at what is a credit card and what is a debit card after we go through further details and how they work:
What is a Credit Card?
A credit card comes with plastic or metal that is provided by a bank or financial institution. Customers borrow funds to make payments for purchases with a credit card. The funds which customers used to make purchases have to pay back within a specific time, otherwise, cardholders can have to pay high interest on late payments.
Also, those people too can get a credit card that doesn’t have a bank account in the same bank. There are many types of credit cards, you can choose a credit card that can meet your needs.
What is a Debit card?
Debit cards look the same as credit cards but the difference is the debit card is linked to a bank account. When you use a debit card for making a payment then the money will be deducted from your linked bank account. You must have a savings account to get a debit card. You can even use a debit card for online and offline transactions, just like a credit card.
Debit cards also provide similar offers to credit cards but for any transactions, credit cards persume as safe than a debit card. Some of the things which shows credit cards are better than debit card are written below:
1. Build a Credit History
If you want to make credit history or try to improve your cibil score, then if you use your credit card wisely, it will assist you to build a good credit score. If we talk about a debit card, it can not help you to make or improve your credit score.
If you know how to use a credit card wisely, it means paying credit bills on time and maintaining a credit utilization ratio can support your credit score. If your aim is to make a good credit score, then you should go for a credit card.
The majority of credit cards provide fraud and purchase protection and are also somewhat separate from your bank account. On another side, a debit card is linked to your bank account, if a thief steals your debit card and makes transactions then the money will be deducted from your bank account.
On the other hand, in the case of credit cards, your bank account money would not be affected until you pay your card bill. If you lose your credit card and somebody makes the payment, you can report fraud. As you informed your credit card provider, your card will be locked and you will get fraud protection after a successful investigation.
3. No bank account is required
No need for a bank account for availing of credit cards because credit cards are not linked to bank accounts, it is moderate through which you borrow funds and return it back. If you have no money, you can still shop through a credit card and pay it back later at your convenience. Whereas to get a debit card, you should have a bank account.
Although credit cards provide the privilege of shopping and purchases, to avail of a good credit card, one should have a good credit score. The credit card provider would like to issue credit cards to those people who have a good credit history. If you are eligible for a credit card then analyze your needs and apply for a card to enjoy the benefits.
Note:- Use your credit card wisely to maintain a good credit record.
Also Read: How To Use Credit Card Wisely
4. Rewards or cashback benefits
Debit cards offer limited rewards or cashback but in the case of credit cards, it offers more benefits. Keep in mind one thing, there is an annual fee for a credit card whereas there is no fee for a debit card.
However, finding the right credit card is difficult as to your needs and spending. Credit cards not only offer rewards or cashback, moreover, but it also provides discounts, free tickets, bonus points, complimentary memberships, and many more benefits.
5. Forex markup fee
If you travel a lot to foreign countries, then credit cards can be the best companion for you. Whenever you deal in foreign currency with a debit card or credit card, the bank charges a forex markup fee. There are some credit cards that come with low forex markup fees, for instance, SBI Elite or FIRST Exclusive help you to save travel expenses as well as avail exclusive privileges such as lounge access, hotel memberships, and many more. For these reasons, credit cards are essential when traveling to foreign countries. On the other hand, you can not avail this kind of benefit from debit cards.
Did you read properly above, no doubt credit cards are perfect partners to save travel expenditures but if you do not use them wisely then it can fall you into a bad debt trap. So you should keep in mind the following points before applying for a credit card:
- Do not use your entire limit of credit card, use as low as possible, it will support you to increase your credit score
- Pay your card bill on time, and do not pay late otherwise, you have to pay higher interest as well as it hurts your credit score.
- Always apply that type of credit card which suits your lifestyle to maximize more benefits.
- Before applying for a credit card, you must compare it with other cards, so that you can find the right card for you.
- Avoid withdrawing money using a credit card otherwise, you may have to pay higher charges.
- Most and last things, read blue print, fees, charges, and terms & conditions carefully to avoid a debt trap.
This article has given you deep details about debit cards and credit cards. No doubt, a credit card is better than a debit card in case of savings expenses and benefits. With a credit card you can avail a lot of benefits, but keep in mind, using credit cards responsibly is more important.