Why are Credit Cards better than Debit Cards?

A credit card is a metal or plastic card that is issued by a bank and allows customers to borrow money in order to make purchases. The cardholders have to pay the money back to the financial institution within the given span of time. Otherwise, the card provider will incur high interest charges on your late payment. One of the major differences between credit cards and debit cards is that it is not mandatory to have an account with the bank. You can get a credit card even if you don’t have an account with the same bank. The credit cards are offered under various categories for varied individual needs. You can select a credit card as per your requirements.

Look for Top Credit Cards in India

Debit cards work like credit cards but they are directly linked with your bank account. This basically means every time you make a transaction the money gets deducted from your linked bank account. Hence, it is important to have a savings account with the bank in order to avail a debit card. You can use your debit cards for online as well as offline transactions just like your credit cards. In short, a debit or ATM card allows you to access the funds you have in your account as per your convenience. With credit cards, you borrow money from the card provider and pay it back, whereas with debit cards, you access the funds you have in your account.

Know everything about debit cards by clicking here.

Suggested read: Difference Between Credit Card and Debit Card

Given that now debit cards offer similar benefits or privileges like credit cards, but credit cards are considered to be safer then debit cards for any transactions. Apart from security, there are a few other things that suggest that credit cards are a better option than debit cards, some of them are mentioned below:

1. Build Credit History

If you do not have a credit history or you are trying to improve your credit score, then using a credit card wisely can definitely help you in this. On the other hand, debit cards are nowhere included in your credit reports, hence, they can’t help you build or improve your credit score. Using a credit card responsibly, which means paying your bills on time, maintaining the credit utilization ratio and not applying for multiple credit cards at a time can help a lot in your credit journey. Therefore, if your goal is to improve or build your credit score, then choosing a credit card can never go wrong.

Also read: How to improve credit score?

2. Safer

Most of the credit cards offer fraud and purchase protection and also a degree of separation from your bank account. As debit cards are directly linked with your bank account, the chances of fraud also increase. For an instance, if a thief gets hold of your debit card and makes a purchase, then the money will be deducted from your bank account, even though you have initiated the transaction or not.

On the contrary, with credit cards, the money in your bank account won’t be affected until you pay your card bill. So, if someone steals your credit card and makes a transaction, you will have ample amount of time to report the fraud. After informing the card provider, the card will be frozen and you will get fraud protection after a successful investigation. Hence, credit cards are safer because even if you lose your card, you don’t have to worry about losing the cash that is in your bank account.

3. No bank account required

As mentioned earlier that it is not mandatory to have a bank account with the bank in order to avail a credit card. This is because your credit cards are not linked with your bank account, it is a medium through which you borrow money and pay it back. With credit cards, you can shop even when you don’t have money and later pay it back as per your convenience. Whereas, to avail a debit card, it is important to have a savings or current account.

No doubt, credit cards give you the privilege of shopping or making purchases at your ease, but in order to avail a decent credit card, it is important to have a good credit score. The card providers like to give credit card to people who have a good credit history. If you are eligible for a credit card, then asses your requirements and apply for it to enjoy the benefits. Also, remember to use your credit card responsibly to maintain a good credit history.

4. Rewards or cashback benefits

Although debit cards also offer rewards or cashback somehow credit cards are a more preferred way to earn such benefits. This is also because credit cards offer better benefits as compared to debit cards. But one thing which you should consider is that credit cards usually come with an annual fee, whereas debit cards come at no cost.

However, it is difficult to find the right credit card as per your requirements and spending pattern. You should always choose a card that suits your lifestyle to make the most out of it. Apart from rewards or cashback, credit cards also benefit you in other ways by providing additional discount, bonus reward points, free tickets, complimentary memberships and much more.

5. Forex markup fee

Credit cards can be your perfect travel partner if you frequently travel abroad. Whenever you make a transaction in foreign currency, the bank charges a forex markup fee on both debit as well as credit cards. Although you can make international transactions with debit cards, there are credit cards available in the market that come with a low forex markup fee. Using cards like Yes FIRST Exclusive or SBI Elite, you can save a lot on your travel expenses while availing exclusive privileges like complimentary lounge access, hotel membership, etc. Hence, choosing a credit card with a low forex markup fee is important while traveling abroad as no such benefits are provided on debit cards.

Suggested read: Best Credit Cards for International Use

No doubt credit cards are a great way to save on your expenses, but using them recklessly can lead you into a debt trap. Therefore, you should keep the following things in mind before getting a credit card:

• Do not exhaust your credit limit, you should use your credit limit as less as possible to improve your credit score
• Pay your credit card bill in full and on time to avoid late payment fee and other interest charges
• Always choose a credit card that aligns with your lifestyle the best in order to maximize the benefits
• Before applying for a credit card, you must compare multiple options to find the right match for you
• Read carefully about the fees & charges and other related terms & conditions
• Avoid withdrawing cash using your credit card as it incurs higher charges

Also read: Tips to Maximize the Benefits of your Credit Card

To summarize, it is clear that credit cards are way better than debit cards when it comes to savings and other benefits. However, availing benefits from your credit card is one thing, but using it responsibly is also important. So, if you already have a credit card and handling it pretty well, try to make most of your purchases through it to maximize the benefits.