When to use debit cards over credit cards and vice versa?

Debit Cards and Credit cards both are similar in their structure and design. But varies in working perspective. Both the cards are useful in their way. They have certain advantages and disadvantages. Credit cards can’t be helpful in all situations. Likewise, debit cards are also not helpful in all situations.

To get rid of this, you can specifically use debit or credit cards in certain places that carry advantages in specific areas. In simpler terms, credit cards will be more useful than debit cards for online shopping. At the same time, debit cards can be quite useful than credit cards in local businesses.

1) What are the things you need to know about Credit and Debit cards?

Before knowing where to use credit cards and debit cards, you need to know how credit cards and debit cards work? And What are the advantages of using them? 

We are in the third decade of the 21st century. The mode of payment has been changed over several years. Instead of paper cash credit cards and debit cards have been found. Debit cards and Credit Card both come in the form of EMV chip cards. 

1.1) What is a Credit card?

“Use Now Pay Later” is the core idea of credit cards. You can swipe the credit card whenever and wherever you want to purchase it. You are using the credit card company’s money which you would need to pay later. According to the need, different types of credit cards got introduced such as 

• Student’s credit card
• Shopping credit cards
• Air miles credit card
• Cashback credit card
• Petrol credit card

Are some of the types of credit cards. With these types, you can choose the credit card which suits your daily expenses and lifestyle. If you are applying for credit cards, you need to meet up the credit card eligibilities possessed by the banking institutions and credit card companies.

An important note is that you should need to spend only within the line of credit. Line of credit is your provided credit card limited. For example, my line of credit of Rs30,000. This was fixed by your credit card company by verifying various factors such as your income, credit score, etc…

1.2) What are the advantages of credit cards?

Here the credit card holds more advantage than debit cards. 

• We don’t need to deposit any amount in your account for using a credit card. 
• You can spend whatever amount you need within the credit limit or a line of credit
• There is no need of paying the credit card balance within the due date. You can even pay only the minimum amount mentioned in the statement. 

• The main attractive advantage of credit cards is their rewards. You can get a variety of rewards based on credit cards. These rewards include cash back, shopping vouchers, special offers, and miles. There are different kinds of credit cards specifically designed for the specific type of reward. For Example, a travel card and petrol card are only beneficial when you use them for traveling and refueling purposes.
• Credit cards companies provide fraudulent security to your card. Therefore there will be no loss of money by your side. 
• The main motto of credit cards is to maintain a good credit score. Credit card usage is one of the best ways to improve your credit score. 

1.3) What is a Debit Card?

A debit card is exactly the opposite way of a credit card operation. “Use Now Pay Now” is the core idea of debit cards. Here you can’t use your bank’s money. You need to deposit your money in your savings bank account. 

So that you can use only those amounts with the debit cards. If you swipe your card money will be immediately deducted from your account. To use the debit card you are provided with the Personal Identification Number (PIN) which you are advised to keep it secret with you. You can also use debit cards in most of the places where the credit card is used.

1.4) What are the advantages of a Debit card?

However, credit cards have a major advantage over a debit cards. But in some situations, the debit card has more advantages than credit cards.

• Debit cards don’t need any annual maintenance charge
• There is no need of paying interest for debit cards.
• You are spending your own money not a borrowed money. So that this is a debt-free option. 
• The debit card application process is easy to apply and within a short period, you will receive your card.
• You can deactivate your card if it’s get lost or being theft. 

1.5) What are the disadvantages of Credit and Debit cards?

These two carry some disadvantages too. They are 

Credit card

• It will lead to credit card debt if you left a balance on your card.
• If you have a standing balance on your card, you need to pay interest for this balance.
• Assume that your credit bill due date is after 40 days. If you pay your bill on the 41st day you need to pay the interest for the whole amount you spend on those 40 days. 
• Some of the credit cards have an annual maintenance charge

Debit cards

• It has fewer reward programs than credit cards.
• There is a daily limit for the debit card in which you should need to spend only with this limit. A particular amount will be deducted as a charge fee while exceeding your limit. 
• If your money has been stolen, it difficult to get a refund in most cases.
• Only some of the debit cards have universal acceptance.

Those are the common disadvantages of credit and debit cards.

To Know more: Credit cards vs Debit cards

2) When to use Credit cards over Debit cards?

Below are some of the places where credit cards will be more beneficial than debit cards. They are

2.1) Shopping online

When you are shopping online, credit cards will be safer than debit cards. As said earlier credit cards have fraudulent protection. On account of any suspicious activity, your money will be protected by the credit card company itself. This couldn’t happen in the case of debit cards. Once your money has gone, you won’t retain it again.

2.2) Large purchases

The credit card provides warranty protection for your larger purchases. They are providing it just for using their card. This warranty can go beyond the warranty provided by the manufacturer. This is additional coverage over your manufacturer warranty. This is generally applicable for larger purchases of electronics, appliances, and other big expenses. 

2.3) Travel and Vacations

Fraudulent action of credit cards will be crucial when you insert your credit card into the ATM that is configured illegally to read your details. This may happen when you are on a travel or vacation. 

Also, the credit card offers several offers for travel allowances. They will earn offers and rewards for hotel booking, dining, transportations, and booking of air tickets. If you are using a travel credit card it will be more beneficial. Similarly costly airlines and hotels only accept credit cards, not debit cards.

2.4) Work-Related Expenses

If you are a businessman, you would need to travel for work-related activities. You may be the person who uses the airline frequently for business trips. On this trip, you may overcome hotel rentals, food expenses, car rentals, and flight tickets. 

While using cash or debit cards you are taking out of your own money, you need to do calculations on how much you need to spend? How much cash do you need to carry or deposit? These things are quite a lengthy process. These can be easily handled by credit card. 

No need to worry about this kind of thing. Also, you earn several rewards and offers while using your credit card in these places. If it is a Business Credit card then it will be more useful. 

These are some of the places where credit card carries more benefits than debit cards.

3) When to use debit cards over credit cards?

Depending upon your circumstances you can use debit cards which have unique benefits. They are 

3.1) Prevention of overspending

The most significant issue of using a credit card is you may fall into the trap of overspending. Unconsciously you are not aware of how much we spend in the last month? Only at the time of paying the credit bill, you will realize. If you leave an unpaid balance on your credit card, you will need to pay interest for that every month.

According to the survey, 12% of Americans find it difficult to manage their credit card debt. This will be easily rectified by using debit cards. As you are spending your money from your account you will not overspend. It will help you to keep your financial situation under control. 

3.2) Additional Perks

Merchants will pay specific amounts to the credit card companies for processing credit card bills. To avoid this processing fee merchants are offering some perks for debit card users. Credit cards are filled with rewards. Due to the processing fees, merchants and retailers offer incentives, offers, and rewards for debit card users.

3.3) Avoiding unnecessary fees

If you want to prevent paying unnecessary fees and interest to your bank and credit card company, you may use debit cards. Using debit cards doesn’t need any annual maintenance fees or any interest charges. 

3.4) Helps local businesses

Credit cards can’t be maintained by middle-class people. At the same time, they are using debit cards for purchasing in local stores. Comparing to credit card, debit card plays a major role in local businesses due to their ease working, and no need of maintenance or paying bills. Etc…

The final words on credit and debit card

Whatever may be the advantages and disadvantages, first you need to analyze if the card suits best for our income, lifestyle, and other circumstances. If you earn a decent income and if you are disciplined in spending you can go for the credit card. But in another case, if you are not disciplined in spending you must choose only debit cards, not credit cards.

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