Key Factors To Consider When Deciding Between Credit Cards And Debit Cards

You may be familiar with the way your spending habits change based on when you are low on cash. It’s a common thing everyone experiences – when you’ve got money in your pocket, you lean toward your debit card, and as your balance goes down, you switch to credit cards.

 But did you know that starting with credit cards from the get-go might lead to more savings than debit cards? Debit cards offer their perks, but the potential savings with the right credit card are hard to beat. Let’s find out what is the difference between credit card and debit card and understand their function.

Understanding Credit Cards

A credit card is a handy plastic or metal card issued by a bank. It empowers you to borrow money to make purchases, expecting you’ll repay the funds within a specified timeframe. Failing to do so can result in steep interest charges. These cards come in various categories to suit diverse individual needs. 

Understanding Debit Cards

If you don’t know what the difference is between credit cards and debit cards – Debit cards operate similarly to credit cards, but they’re directly linked to your bank account. This means each transaction deducts money straight from your linked account. To possess a debit card, having a savings account with the bank is crucial.

Debit cards are versatile for online and offline transactions, just like credit cards. A debit or ATM card lets you access the funds in your account at your convenience. While credit cards involve borrowing money from the provider, debit cards allow you to use the funds you already have.

 Advantages of Opting for Credit Cards

Though debit cards now have similar benefits to credit cards, the latter remains a safer transaction option. Beyond security, several factors make credit cards a more favourable choice: 

  1. Building Credit History

Using a credit card responsibly aids in building or enhancing your credit score, unlike debit cards that don’t impact your credit report. Managing your credit card adeptly – paying bills punctually, maintaining a favourable credit utilisation ratio, and avoiding multiple credit card applications – significantly aids your credit journey. If improving or establishing a credit score ranks high on your priorities, a credit card is your go-to solution. 

  1. Bank Account Not Required

Unlike debit cards, credit cards don’t necessitate a bank account with the issuing bank. Credit cards operate as a borrowing tool – you can shop and transfer money from credit card to bank even when you have no funds and pay back at your convenience. However, getting a debit card mandates a savings or current account.

Credit cards empower you to shop without immediate funds, but obtaining a favourable credit card entails a respectable credit score. Card providers favour individuals with commendable credit histories. If you meet the eligibility criteria, assess your needs, and apply for a suitable credit card to unlock its benefits. Responsible credit card use is essential for maintaining a robust credit history.

  1. Rewards and Cashback Perks

Although debit cards provide rewards and cashback to some extent, credit cards are the preferred route for earning such benefits. Credit cards offer superior perks compared to their debit counterparts. It’s worth noting that credit cards might carry an annual fee, whereas debit cards are usually free. 

Selecting the right credit card aligned with your lifestyle and spending patterns is crucial for maximising rewards. Beyond rewards and cashback, credit cards offer additional discounts, bonus reward points, complimentary memberships, free tickets, and more.

  1. Favourable Forex Markup Fee

Credit cards are ideal companions for frequent travellers, especially those with low forex markup fees. While debit and credit cards follow forex markup fees for international transactions, certain credit cards have lower fees. 

Some cards offer reduced forex markup fees and exclusive perks like complimentary lounge access and hotel memberships. This is a marked advantage, as debit cards don’t provide such benefits for international travel. 

The Key to Responsible Credit Card Usage

 While credit cards present opportunities for savings, reckless use can lead to debt. Keep the following pointers in mind before acquiring a credit card:

  • Use a minimal portion (below 30%) of your credit limit to enhance your credit score.
  • Timely and complete payment of your credit card bill avoids late payment fees and interest charges.
  • Opt for a credit card tailored to your lifestyle for optimal benefits.
  • To find your best match, compare various options before applying for a credit card.
  • Familiarise yourself with the fees, charges, and terms and conditions to transfer money from credit card to bank.
  • Avoid cash withdrawals with your credit card, as they incur higher charges.

Also Read: What is the Credit card settlement Process? 


In a nutshell, credit cards triumph over debit cards regarding savings and advantages. However, capitalising on credit card benefits requires responsible usage. If you’re adept at managing your credit card, consider using it for most purchases to maximise benefits. Remember, credit cards can be powerful tools for financial well-being if handled prudently.

Read: Driving Towards Savings: Unlocking the Benefits of Fuel Credit Cards

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