Difference Between Credit Cards And Debit Cards
Credit cards and debit cards are both used for making payments and purchases but there is a whole lot of difference. Debit cards are linked to a bank account or a money market account and the amount used will be debited from that amount. There is no interest, monthly bill or money due for debit card transactions. Credit cards are like loans that have a credit line which is the maximum balance you can utilise out of that card. As purchases are made, the available balance is reduced. Credit card payment will incur an interest and you are required to pay a minimum amount on a monthly basis until you close the balance.
Advantages Of Using Credit Cards
Credit card is a convenient way to make financial transactions. A credit card can be used to make everyday purchases like groceries and other food items. It can be used to pay your gas, electricity bills and other services. You can plan for a trip, buy jewellery or buy expensive home equipment as you may not have ready cash to purchase such expensive goods. Any unplanned emergencies and expenses can be handled by credit cards. Using credit cards will give you credit points which you can redeem to avail exciting rewards. Some banks offer cash back and mile points. More than debit cards, credit cards have protection against frauds. Credit cards give you increased purchasing power. You may not have all the funds in your bank account. Credit card can give you that extra fund at the most pressing times as and when you need it.
You can travel worry free with a credit card as there are no foreign transaction fees. Major car rentals and hotels require a hold on your card to book a room or reserve vehicle. This procedure will result in keeping that much fund available for the service and cannot be used for any other purpose. Credit cards are the right choice for such transactions as you can be confident that the fund can be parked aside for a specific purpose. Responsible use of credit cards can improve your credit worthiness and your CIBIL score.
Using Credit Cards Responsibly
Making purchases with a credit card is like using up a loan amount which needs to be repaid. To enjoy all the power a credit card offers, you should learn to use it responsibly. One must identify the need for such purchasing power and how you plan to repay it before deciding to apply for a credit card. You need to limit the use of credit cards for purchases that let you pay off the balance within a reasonable duration of time. If you fail to pay the balance, it will start accumulating interest and reduce the spending capacity of the credit card. So, it is always wise to keep away from using credit cards for impulsive purchases of expensive items for which you cannot pay off the balance. Such precautions will help you enjoy the complete power of credit cards.
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