Credit Card vs. Debit Cards-Which is the Better?

Though both credit card and debit cards look alike and are used to make payments, there are notable differences between CC and debit cards. No doubt, they both are the most powerful financial tools of the current era, yet they differ in features.

Credit Card Features

When you make payments through a CC, you’re borrowing money from the credit card issuer and paying it to the merchant. In short, you’re using money that you don’t have; hence it’s a debt. At the end of the billing cycle, your card issuer sends you a statement, and on or before the due date, you must pay your credit card balance. If you fail to do so, then you’re obliged to pay a higher interest for the balance. Usually, the monthly interest rate of credit cards stands between 3-4%. 

At the same time, credit cards offer ample benefits to their users. Let’s check which are the most striking credit card features.

  • An instant loan against a credit card 

You can avail of an instant loan against your CC in case of emergencies. The maximum amount of this type of loan depends upon your credit card’s unutilized credit limit. This unsecured loan requires neither any paperwork nor any additional eligibility criteria. However, to enjoy this credit card feature, you need a good credit history.

  • Grace period

The grace period is the span between the end of the billing cycle and the due date. Usually, CC companies do not charge interest on your credit card balance during the grace period. If you carry forward any amount from the previous billing cycles, you won’t take advantage of this credit card feature.

  • Rewards and cashback

Credit card issuers offer bonuses if you spend beyond a specific limit using the credit card and give you cashback for particular purchases. You can use these rewards and cashback for future purchases and save money.

  • Discounts on merchants

It’s prevalent for CC companies to collaborate with merchants and offer special discounts on their merchandise to CC customers. 

  • EMI payments

This CC feature is a blessing for those who find it challenging to pay off the balance. CC issuers allow you to convert big-ticket purchases into EMI and thereby reduce your interest burden. EMI option enables you to pay off your due over a while. 

  • Credit score

Improving your credit score is easy with credit cards. Pay your balance on time – that is all you need to do for it. 

Difference between Credit Cards and Debit Cards

Credit Card Debit Card
Approach Buy now, pay later Buy now, pay now
Funds When you use a CC, you’re borrowing money from your CC issuer. Money will be deducted directly from your savings account.
Spending limit Monthly credit limits are there on spends. Different people have different credit limits.

There exists a daily as well as a monthly limit for cash withdrawals using a CC.

Daily limits on cash withdrawals as well as for spends.
The maximum amount you can utilize You can make transactions up to the credit limit of your card. The amount lying in your savings account.
Interest rate You are obliged to pay interest if the balance is not paid fully. You can enjoy a grace period if you pay the full bill amount every month. No interest charge as the source of funds is your bank account.
Repayment  CC companies allow you to pay a minimum amount every month, usually 5% of the balance, and carry forward the rest to the next month.

You can convert your high-end purchases into EMI and pay off them over a period. 

No repayment is required as you are using your own money.
Rewards You will get reward points, cash back, and discounts for making transactions using your CC.  You can avail of cash backs and discounts for purchases. But they are very limited.
Annual fees The annual fee of your CC depends upon its type. There exist free cards, which have no annual fee.

Several card issuers offer a waiver on the annual fee if you spend beyond a specific amount annually.

Low to nil
Charges A number of fees are associated with CCs like late fees, over-limit fees, joining fees, etc. However, you can avoid many charges by using a credit card smartly. Only a limited number of charges are linked with debit cards.
Impact on credit score CC help to build a good credit score. No impact on the credit score
Liability for fraud Limited liability for fraud. Limited protection for your debit card in case it’s stolen or missing.

The verdict

Both CC and debit cards have pros and cons. But when it comes to picking one, CC has an edge as they allow you to save more money because the rewards and privileges that a CC offers are much higher than that of a debit card. To enjoy maximum benefits from one card, secure Bajaj Finserv RBL Bank SuperCard.

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