Wednesday, May 30, 2018

Debit vs Credit cards – Which one is better for you?

While shopping you have the option of paying either through your credit card or your debit card. Though the difference might not appear, but there is a huge difference the way payment is processed behind the scene.

Debit vs Credit CardsPaying through Debit card is almost like paying cash and is usually without transaction charges. Payment though debit cards is also instant. On the other hand credit card transaction requires a signature, and is processed by the credit card company. The funds may or may not be immediately deducted from your bank account, depending on how the retailer handles their transactions. Some stores "batch" their credit transactions and send them at the end of the day. Unlike debit cards, to the merchant, processing a transaction as credit usually involves a credit card transaction fee to the major issuers, like Visa and Mastercard. 

Credit cards are mostly a better option while shopping online because of host of offers provided by issuer banks such as interest free EMI, zero transaction charges and higher reward points. It is also relatively safe as you are never liable for unauthorized charges, unlike debit transactions, which are the same as cash. It is advised to use your credit card while purchasing a flight ticket as many companies offer air miles for purchasing the tickets through credit card.

While shopping in a small business or a local store, it is better to use debit cards as there is very high likelihood of you being charged a transaction fee.  Also if you are following a strict spending plan, debit card is always the right choice as it automatically limits your spending. Credit cards often lead you to fulfilling your instant gratification because of credit limit availability and thus lead to over spending.

Depending on the circumstances, credit can be a much more powerful and flexible option than debit. You're protected from identity theft, your purchases can be protected from defects and failures, and disputes are handled quickly without you having to pay up just to get your money back. However, credit cards are still credit, and you're in debt for the purchases you make. You pay interest on them, and not being able to handle your credit wisely can lead to serious financial problems. Sometimes it can be better to not spend at all unless you have the money to spend—in which case debit card and cash are better options.

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