Until recently, debit cards had overshadowed the Indian payment card market. However, the credit card market, though smaller in comparison, has witnessed significant growth in the past few years.
Since both debit and credit cards are payment tools facilitating users to conduct transactions without, it has also led borrowers to question which one of them will be most suitable for shopping. Therefore, to make an informed decision, they should have a thorough understanding of the difference between debit and credit card.
The difference between debit and credit card
The main difference between these two payment cards lies in the way they work. A Debit card is linked to the consumer’s bank account, and when a transaction is made, the amount is deducted directly from that. On the other hand, a credit card allows users to borrow funds from a pre-approved limit and pay for it on a later date. Credit cards also come with additional features that debit cards do not. Some of these features are as follows –
1- Reward program –
Most credit card providers offer a lucrative reward program where users can earn bonuses with every transaction with their credit card. Besides transaction, one can also earn reward points as a welcome bonus and on reaching certain spending milestones. It is also one of the major differences between debit and credit cards as no such feature is available with debit cards.
Hence, one should know how to redeem their credit card reward points to avail cashback and discounts on the purchase of items like flight tickets and hotel bookings, movie tickets, appliances, and even health care services from partner merchants and stores. The accumulated reward points can also be used to make down payments for certain big-ticket purchases.
However, the amount of reward points can vary based on the type of card and lending institution. For instance, a basic credit card may offer 1-2 reward points for every Rs.100 spent, whereas premium credit cards may offer significantly more reward points.
2- Robust security features
Credit cards also have more robust security features compared to debit cards which make them a more suitable option for online shopping. For instance, a credit card like Bajaj Finserv RBL Bank SuperCard has zero-fraud liability cover and in-hand security features. While on the other hand, debit cards are linked to a user’s bank account, and in case any unauthorized transaction takes place, he or she may sustain a substantial financial loss.
3- EMI conversion
Another difference between debit and credit cards is that with the latter, one can easily purchase big-ticket items like electronics, travel expenses, furniture etc. and pay off the outstanding amount without straining their budget. It is because credit cards allow users to convert the due amount into affordable EMIs.
Therefore, owing to these features, a credit card is more suitable for everyday expenses compared to a debit card. Additionally, individuals who apply for credit cards can also avail an emergency loan against the unutilised credit limit available on their account. They can get the loan for an interest-free period of up to 90 days and are only required to pay a nominal processing fee.
Some credit card providers, such as Bajaj Finserv, also provide pre-approved offers to applicants which aid in a hassle-free and smooth application procedure. Besides credit cards, such offers can be availed on other financial products as well, like business loans and personal loans. One can check their pre-approved offers by entering their name and contact information.
Individuals can also use a credit card to improve their credit score and build up a favourable credit profile by making timely payments of their credit card bill. On the other hand, using a debit card does not impact the credit score in any way.