Is it better to use a credit card or debit card?

Is it better to use a credit card or debit card? When debating whether to use a credit or debit card for a purchase, you may end up confused about which is the better product for safety concerns.

While both Credit cards and Debit Cards can be used to pay for your purchases online or offline,  the key difference between the two is what happens after you swipe your card.

Now that we understand the fundamental difference let us now look at what differentiates a Credit Card v/s Debit Card. Here’s what you need to know so you can make the right decision.

Is it better to use a credit card or debit card?

Is it better to use a credit card or debit card?

Although credit cards and debit cards look and function alike, they’re two very different products.

The Difference Between Credit Cards and Debit Cards

# Role

Debit cards are extremely useful and convenient as it relieves us from the stress of carrying a cash-heavy wallet, a cheque-book, and yet gives us the freedom to have free access to your money through ATMs and swiping the card at merchant outlets instead of paying by cash.

Credit cards on the other hand function differently. It is more like offering you a line of credit.

In simple words it is more like you getting a loan, i.e to need to buy/spend on something this month and don’t have the cash to do so, hence you charge that spending to your credit card (without having to pay money from your wallet or account at that very moment.

But the same amount is charged to your credit card bill generated the next month and that is when you have to pay that amount from your own pocket.

Failing to pay your credit card bill on time leads to interest accumulation, late payment fee, and bad credit score.

# Linked to

Debit Cards are directly linked to your bank accounts such as a Salary or Savings Account.

When you use your Debit Card, the amount is deducted directly from your bank account. Debit cards linked to the cardholder’s bank account, also ideal for quick and hassle-free usage.

Credit Cards, on the other hand, allows customers to buy now and pay later. When you use your Credit Card, your bank extends you credit for a specified period.

You must pay the bank for your purchase within the specified date also called the due date.

Credit cards issued by the said bank or financial organization.

# Credit Limit

Credit Cards have monthly credit limits, which depends on the kind of card you have, your relationship with the bank, and your credit-worthiness.

By using your Credit Card, you borrow funds from the bank. Your spend at any point in time cannot exceed these credit limits.

Debit Cards can be used only up to the amount that is present in your bank account. However, the bank may have a daily purchase limit on your card.

# Convenient

Most users feel that debit card is not only more convenient but less stressful as it lets you spend within your financial abilities without accumulating and debt or interest in future. It relieves you from a lot of stress, from getting into a debt cycle and overspending.

Using a credit card is tempting because you can spend a lot more than you have the cash for, but the flip side is that you end up being under the burden of clearing up the debt/loan eventually.

Also, there are a lot of places in India which accept payments only in cash and debit card enables you to withdraw cash conveniently from ATMs.

# ATM withdrawals

While cash withdrawals are allowed on both Credit and Debit Cards, although both Debit Cards and Credit Cards have a daily cash withdrawal limit.

Cash withdrawals on a Credit Card attract a withdrawal fee and interest. Besides, Credit Cards may have a monthly withdrawal limit.

Debit Cards used at the bank’s ATM attracts no withdrawal charges.

# Interest

Credit Cards come with up to 50-days of interest-free credit. To avoid interest, you must pay your outstanding amount by the due date.

Since the amount is paid directly out of your account in the case of a Debit Card, you need not pay any interest.

# Annual fees

Many Credit Cards have no annual fee. Some do charge a yearly fee, which is waived off on achieving a certain amount of spends on the card. A few specialized cards charge an annual fee.

Whereas Banks usually do not charge annual or renewal fees on Debit Cards and are automatically issued to customers holding a Salary or Savings or Current account with the bank.

# Benefits

Credit Cards offer you a wide range of benefits and perks, including CashBacks, discounts and, most important, rewards that you can convert into free flights and exciting gifts.
Debit Cards also offers benefits such as discounts and cashback.

# Usage

In terms of usage, Credit Card v/s Debit Card difference is not very significant as both can be used at merchant outlets and online. However, there may be certain types of transactions or websites which only allow the use of Credit Cards such as car rentals or in some cases booking hotels.

# Eligibility

Most Credit Cards have minimum eligibility criteria, based on income, existing relationship, and credit-worthiness.

On the other hand, you can get a Debit Card quickly if you have a Savings or Current Account.

# Security features

Both Credit Cards and Debit Cards have similar security features, such as SMS notifications, PIN, and OTP.

Many Credit Cards come with zero liability insurance for stolen and lost cards, which offer additional protection against fraudulent activities, that are not extended in Debit Cards.

There is a huge flipside to the same being, that the credit card comes with the temptation of overspending and getting into the vicious circle of debt.

When Is It Safer to Use a Credit Card?

Is it better to use a credit card or debit card?

There are a few key areas where credit cards are the winner for consumer protection, like

#  Advantages of Credit Cards

Help you build a positive credit history, provide protection if your card is lost or stolen, offer rewards on purchases you’re already making.

Provide additional benefits, like extended warranties on electronics, give a “free” month-long loan (when you pay your bill in full), provide more flexibility when booking a hotel or renting a car.

# Online shopping

Both card types can be used for online shopping, but a credit card is the preferred instrument.

You don’t want to give savvy thieves who troll the internet access to all the money in your checking account, and then have to wait until it’s reimbursed.

# Travel Protection

When you’re on the road, debit cards can be problematic.

Many hotels, gas stations, and rental car companies place “holds” on customer cards that claim an amount of money until the final cost becomes apparent.

For example, you’re checking into a hotel for five days. If the hotel charges $200 per night, the hotel will likely place a hold on $1,000, plus extra money for incidentals.

If you’re using a debit card, that money will be frozen until you check out and that’s even if the company accepts it as many require credit cards.

On the other hand, when you use a credit card, a hold reduces your available credit and not the money in your bank account which means it won’t put a damper on your vacation budget.

# Purchasing big-ticket items

Credit cards are the ideal option for especially costly purchases, such as electronics and appliances, since the FCBA protects you against disputes.

If an item arrives broken or isn’t what you expected (and your attempts to work out the issue with the retailer fail), you can request a chargeback from the credit card company and you’ll be reimbursed.

Some credit cards also offer purchase protection, which insures your purchases against theft, loss and accidental damage.

If your credit card has extended warranty protection, you can file a claim even after the original manufacturer’s warranty period expires.

For example, if you buy that sweet new smart TV on your credit card, you could automatically get an extra year on the warranty without lifting a finger because we all know things are on a timer to break as soon as their manufacturer’s warranty is up.

When is it Safer to Use a Debit Card?

Is it better to use a credit card or debit card?

Advantage of Debit Cards

# Easy to use

 Debit Cards make transactions fast, easy and convenient to use. Since the payment is deducted directly from your bank account, a place where the money already exists, it can be done instantly.

You don’t have to carry cash or a checkbook.

# Convenient to Use

Debit Cards are extremely simple to use. Since the payment is deducted directly from your bank account, a place where the money already exists, it can be done instantly.

It is much quicker than having to wait for a credit transaction to go through or having to worry about having an adequate amount of cash in the account, to cover your expenses. Debit Cards make transactions fast, easy and convenient to use.

# No Debt

With a credit card, it’s easy to purchase anything you want, even if you don’t have the funds. With debit cards, the money comes directly from your bank account, so you avoid spending more money than you have. Plus, you don’t have to remember to pay the credit card bill once a month.

# Self Protected

Debit Cards are protected by a four-digit pin number or PIN (Personal Identification Number) which you set yourself. This PIN is essential when making almost any purchase with your Debit Card. It gives you a great deal of safety against theft.

You also receive a notification every time a transaction goes through, double verifying the transaction. These cards can also be frozen very easily and quickly. So if you lose it, you can prevent damage by freezing it within no time.

# Easy to Obtain

Anyone can open a bank account with a minimum deposit. The only and most important thing that you must have, in order to have a Debit Card has a bank account.

So, you can use a Debit Card with the only pre-requisite being a bank account that is linked to your card.

# Fees 

Although some checking accounts have fees associated, they are significantly less than most credit cards. Avoiding late fees, annual fees and interest charges can save you a bundle.

# Control your budget

Debit cards can help you avoid getting into overwhelming debt. One of the best things about a Debit Card is that you cannot spend more money than you have, which means you cannot go into debt.

This helps you to budget, since every time you transact, the money is deducted from your account.

# Works as an emergency fund

Debit Cards have the ability to give you cash. They double up as ATM cards and allow you to withdraw money from an ATM. Therefore, working as an emergency fund for you.

In addition to the ATM use, a majority of stores offer cash back options at the checkout. You can shop conveniently and reasonably using your Debit Card.

# Stressfree transaction

When you use your debit card to get money from your bank’s ATM as well as affiliated ATMs and retailers, such as drug stores and supermarkets, you won’t be hit with a cash advance fee.

If you want to know the adverse effects of using your debit card for online shopping then follow my previous article Why you should not use a Debit card for online shopping?

What is Prepaid Debit Cards?

If you just can’t decide, Prepaid debit cards offer some of the benefits of both credit cards and debit cards.

Like credit cards, they keep your primary checking account from being exposed to the world. If there’s an error or somebody steals your card number, the only money available is money you’ve loaded on the card.

However, you’ll be unable to spend those funds (which you might need), and getting the funds replaced may be a slow and difficult process.

Like debit cards, prepaid cards prevent you from going into debt. You can only spend funds that you’ve loaded on the card. Once that money is used up, the card stops working.

What about grabbing “Credit” when you swipe your Debit card?

Is it better to use a credit card or debit card?

When using your debit card, you often have the option to pick a “credit” transaction, which requires a signature rather than a PIN.

But it’s important to note that Choosing credit won’t make your debit card act like a credit card.

It doesn’t help you establish credit history, and it doesn’t give you additional consumer protections. Instead, selecting “credit” or “debit” just determines how the merchant processes the card and what fees it pays.

It also could change the processing time, whereas “credit” transactions might take a few days to clear, “debit” transactions hit your checking account immediately.

That’s why, if you don’t have enough money in your account to cover the purchase, selecting “credit” sometimes permits the transaction to go through.

When to Use a Credit Card or a Debit Card?

Is it better to use a credit card or debit card?

# A credit card is best for most purchases. When you shop online or in-person, a credit card protects you in several ways that a debit card can’t (including sheltering your checking account, extended warranties, and more). 

# The key is to pay off the card’s balance completely every month to avoid finance charges.

# Whereas a debit card is better for cash withdrawals and helps to avoid overspending and debt. For cash withdrawals at ATMs, your debit card is the best option.

# You’ll keep fees at a minimum, and your card information is unlikely to get stolen if you stick to safe ATMs.

# If a credit card will tempt you to take on a mountain of debt, stick with a debit card.

# But ultimately, you need to take charge of your spending the type of card you use can’t do it for you. If you don’t do that, you’ll find ways to cheat and spend more than you should regardless of what’s in your wallet.


Depending on your spending habits, that could be more important than anything else. If you won’t be responsible with a credit card, a debit card is undoubtedly a smarter choice.

Paying sky-high interest, damaging your credit history, and spiraling into uncontrollable credit card debt is certainly not worth the perks.

Hope my this article is enough to understand the pros and cons of using both the Debit and Credit cards along with the importance of using it as per the situation’s requirement.

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