According to the Reserve Bank of India, the number of debit card holders declined by 34.4 million, while the number of credit cardholders increased by 0.98 million as of December, 2018. Consequently, the amount of credit card transactions at POS terminals rose by Rs.2,617 crore. In the meantime, the total value of debit card transactions fell by Rs.900 crore, bringing the total amount to Rs.53,142 crore.
Financial experts consider such rising popularity of credit cards over debit cards amongst consumers to be an effect of growing awareness regarding its several benefits. When considering the different variables associated with a credit card vs debit card, there are certain factors which require thorough assessment. These factors play an instrumental role in distinguishing between the two types of cards.
Factors to know about online credit over a debit card
The following factors discuss the various distinctions when considering credit cards vs debit card –
- Customer loyalty programme
Customer loyalty programmes are designed to reward customers who use their cards wisely and regularly. Credit cards come with extensive customer loyalty programmes to suit varying expenses of multiple individuals. Such programmes constitute of discounts on certain expenses, offers, vouchers, etc.
On the other hand, debit cards have limited rewards or customer loyalty programmes. These rewards comprise cashbacks or discounts, which are, in most cases, lower than what is provided in credit card programmes.
- Regulate expenses
When using a credit card, you are provided with a predetermined credit limit. It is the total amount which you can spend using a card in a billing period. You can also track the expenses you are making with a credit card by checking its statement online.
Financial experts suggest utilising up to 60% of the available credit limit to be considered as a less credit-hungry and financially responsible user. Doing so helps improve your credit or CIBIL score. It also aids you in regulating your expenses in a month in accordance with a set limit.
Debit cards are essentially financial tools to access and manage available funds in your savings or current account.
- Improve credit score
Responsible and diligent usage of credit cards can help you improve your credit score. It enables you to build a substantial credit history and responsible repayment history, which are both essential factors in deriving your credit score.
A healthy credit score potentiates you opt for feature-rich credit cards such as the Bajaj Finserv RBL Bank Credit Card, loans at affordable interest rates, etc.
- Manage big-ticket expenses
One of the major benefits of using a credit card is the EMI conversion facility. With this, you can convert any large expense you have made using a card into equated monthly instalments for convenient repayment.
Debit cards do not come with any such feature; therefore, any big-ticket expense made using such a card will be deducted from your linked savings account.
In case of card fraud or identity theft, credit cards are a more secure financial tool, an important pointer to consider in a credit card vs debit card argument. It is because, in the case of a debit card, any fraud would directly affect your in-hand funds. Also transactions processed on a debit card are immediately credited from your available funds.
Depending on the amount, a fraudulent transaction on a debit card can substantially compromise your finances. On the other hand, in the case of a credit card, if you come to notice any unauthorised transaction made using your card account, you can immediately report it to the respective issuer. Such issuer would take necessary measures to address the report, and there is a high chance that no financial repercussion is imposed on you.
These are a few of the reasons why you are smarter with a credit card in your pocket. There are different types of credit cards to suit the varying expense patterns of individuals.