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Debit cards draw money from your bank account. Credit cards allow you to borrow money that must be repaid. Credit cards offer several advantages, including the chance to build credit and improved security measures.
If you own a Debit Card as well as a Credit Card, you must often face the dilemma of when to use a Credit Card or Debit Card.
Your debit card is basically a plastic check. When you use it to make a purchase, it takes the money directly out of your bank account. So, if you try to spend Rs. 5000 but only have Rs. 3000 in your account, the bank will decline your transaction.
Because the money comes out of your account as soon as you swipe, you won’t get a bill and you won’t pay interest. You might, however, face overdraft fees if you try to spend more money than is in your account. Debit cards also work as ATM cards. You can use them to take cash directly out of your bank account.
Your credit card, unlike a debit card, is like a loan. When you open a credit card, you’re approved for a certain line of credit.Also known as a credit limit; a line of credit is how much you can spend before your card is “maxed out.” Once you reach this threshold, you can no longer use your card for purchases at least not until you make a payment and it posts to your account.
Each month, you’ll get a bill from your card issuer. This bill will include the amount you spent during the current billing cycle (minus any credits), any other charges on the account, and any leftover balance from the previous month. Though you’re only required to cover the minimum payment (and not the whole balance), you’ll typically pay interest on whatever amount remains.
Because credit card interest rates are usually very high, it’s highly recommended to pay your bill in full each month to avoid interest fees completely.
There are many reasons you may want to pay your monthly bills with a credit or debit card when possible. Here are just a few of the advantages of paying with plastic:
Here’s the flip side of paying bills with plastic:
While each of them has its own merits and demerits, here are some situations clarifying when to use a Credit Card or Debit Card:
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