What to get: Credit Card OR Debit Card?

In the new cashless generation, Debit and Credit Cards are well-adopted among the population. But knowing the difference and using them effectively will help you manage your finances better, and save a few extra bucks. Which one to use for paying bills and which one to use for shopping, which one is cost-effective, and which one requires extra charges? Here is your A to Z guide!

Irrespective of the similar size and appearance, supporting seamless cashless transactions, these cards are different in more than one way.

A credit card allows you to borrow money within a pre-approved limit. You can use this limit (credit limit) to make transactions anywhere. The bank charges you for the services you availed of with the credit card. Different Credit cards, such as reward-based, mid-range, premium, and secured cards, have different charges based on their benefits and services.

A Debit card, on the other hand, is linked to your bank account. Every time you use your card to make payments, the bank will deduct the same amount from your bank account.

With most credit cards, you have to pay a fixed fee, known as the annual fee, depending on the card and varies from bank to bank. Premium cards usually have the highest annual charges among all.

On the other hand, debit cards do not have joining or annual fees, which makes them more convenient and affordable.

Credit Cards give you some extra time, up to a few weeks, to pay for your purchases. This benefit comes with a price, though. A percentage of your purchase is charged as interest.

Whereas, using a Debit Card to make a purchase means paying immediately and deducting the amount from your bank account.

Credit Cards provide reward points and cashback for every transaction you make in a particular category, including lifestyle, travel, bills, utilities, shopping, and many more. These points are redeemable for exciting benefits and discounts, which help you save money.

Usually, Debit Cards do not offer cashback or rewards. Even though some provide discounts over partner brands and platforms, the benefits are less than that of a credit card.

A credit score is a number that rates a consumer's creditworthiness. The higher the score, the better a borrower looks to potential lenders. Your credit card use impacts your credit score. Your credit score improves when you use the card wisely and pay it back in time.

However, debit cards have nothing to do with a score. You use the money that you have in your bank account.

Whenever you withdraw cash from an ATM with a credit card, the bank charges a cash advance fee on the transaction amount. Moreover, the same will also carry finance charges making it complicated and cost-ineffective to withdraw cash with credit cards.

Whereas, debit cards are more effective as they were designed originally for convenient cash withdrawals. No extra costs or charges for withdrawal using a debit card.

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