Debit vs. Credit Cards: Which is Better?

There are numerous reasons why debit cards are better than credit cards, but there are also some exceptions.

Let me explain with a simple analogy: You purchase something from a shop and are about to pay for it when your neighborhood money lender suddenly arrives and says that he will pay for it instead of you. You can return the money to him anytime within the next 50 days. After that, of course, he will charge a penalty, so you must remember to return the money within that period.

What would you do? Of course, let the money lender pay for you! Why would you pay from your own pocket when someone else is ready to pay for you at no extra cost!

HSBC credit card

This is the same thing that credit cards do. They are like a money lender that lends you interest-free credit for a short period (say upto 50 days). As long as you pay it back within that period, you’re perfectly fine! But if you’re the careless or lazy type and are likely to forget to repay it, my suggestion is to stay away from credit cards! They charge exorbitant fees for any mistakes you make.

Pros of credit cards:

Credit cards offer interest-free credit for a limited period.

– Credit cards also let you make purchases when you don’t have the money in your bank account. With a debit card, you can only buy something if you have the money in your account.

– Thirdly, credit cards offer either a cash back (around 1-2% of the bill value) or reward points on all purchases you make. Most debit cards don’t offer any benefits on purchases. So over a period of time, you can accumulate a lot of points just by doing your ordinary day-to-day shopping and purchases, and redeem those points for some nice gifts or just plain cash back!

– Not only that, many credit cards have some very good offers on select purchases or in specific shops. You could get a very good percentage of cash back, or some real good freebies, for paying with your credit card.

Few cons of credit cards:

– There are some cases where debit cards can be useful as opposed to credit cards. Sometimes debit cards have good offers on select purchases or at select shops. Always keep track of any offers on your credit and debit cards, and use whatever gives you maximum benefit for that specific purchase.

– Also, some shops charge a fee (say 2%) if you pay through credit cards, but none if you pay through debit cards. Some shops may only accept debit cards.

– And most certainly, never ever withdraw money from an ATM using a credit card! Always use a debit card. If you don’t have cash in your account but have some time, then go in for a personal loan that will have an interest rate of around 14% per annum. Credit cards charge an interest of around 3% per month, that adds up to 36% per annum ! This is nothing but daylight robbery! Do it only if you need money urgently and have no time to even go and borrow it from a friend.


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