Credit Cards vs Debit Cards

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Credit Cards vs Debit Cards

Credit cards or Debit cards? There are those who would vouch for a credit card benefits over that of a debit card and there are those who believe otherwise. So which is actually better? Or are they winners in their own right? Lets take a look at both of their advantages and disadvantages.

Debit Cards - Debit card users receive their funds from the amount that is deposited with the card provider, for e.g., if the Debit card is issued by the State Bank of India then the funds that can be used is the amount deposited in the user’s SBI bank account. 

The good part
The best part of having Debit cards is, (apart from the spending aspect, we mean) that the user can keep an eye on his/her purchases and stay on track with their spending. This is especially advantageous for students and those who have just started earning and want to manage their finances in an organized manner.

Apart from this, there is no extra fee charged on any of the purchases as well, unless the buyer spends more than the amount available in his/her bank account and incurs, what is called, an overdraft fee. This basically refers to the fee charged by the bank when a user spends/withdraws more than the available balance in his/her account. This fee varies with different financial institutions.

Debit cards offer immediate access to funds and are easy to apply for as well. Certain banks also offer free debit cards with the creation of a new savings account.

The not-so-good part
Sometimes, debit card transactions might not be completely secure. With internet scams popping up everywhere, online payments using debit cards, unless the person is careful may result in card details falling into the wrong hands. 

Similarly, if the card is lost then the owner is left in a lurch as the perpetrator can access the entire amount present in the bank account, unless the bank authorities are notified and the card is blocked immediately.

Convenience is not always guaranteed, there are places that do not accept debit cards and accept only cash. Apart from this, at certain times there are fees charged, if the ATM machine the money is being withdrawn from is not affiliated to the required bank. Further information on this can be sought from the bank directly.

Credit Cards - Regarding credit cards, the user borrows a certain amount of money from the issuer up to a certain limit. The credit does not come with additional interest, provided that the user pays his/her monthly bills on time. Therefore, with Debit cards, the user only spends what he/she already has but there is a little more flexibility when it comes to credit cards.

The good part
Credit cards come with a grace period. Unlike Debit cards, credit cards don’t use funds from the user’s bank account but from the bank or financial institution that makes the money available to the user. It is also a quick way of borrowing money to pay for something that the user cannot afford immediately.

Credit cards come with their own set of perks and rewards. Banks usually provide offers to entice potential customers. These can include lifestyle deals, airline discounts and much more.

There is higher security offered on credit cards in case they are lost or stolen, as compared to debit cards. However the issue needs to be reported to the bank authorities at the earliest. They also offer more protection on large purchases and especially on goods that are bought online.
Another advantage is that credit cards can be used to build up a good credit score which makes it easier to obtain other credit products such as home loans, auto loans etc.
The not-so-good part

Not paying the bills on time can result in a vicious circle of debt. Since the user is essentially borrowing money, it is imperative for him/her to pay it back.

Additional charges such as interest fees are charged if the bills are not paid on time. Apart from this, there might be an additional fee charged if the user exceeds the credit limit.
Now that we have listed some of the pros and cons of both credit and debit cards, making the right decision as per the finances of the user is important so as to spend wisely.

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