Credit and debit cards are two distinct payment methods. However, in terms of your financial well-being and transactions, one may be a better choice than the other. Offering rewards, cashback, greater security for transactions, and helping you build your credit score, credit cards emerge as a definite winner.
In this article, we will touch upon the various reasons that make credit cards a smarter and safer choice over debit cards. We will also shed some light on the unique benefits that co-branded cards have to offer, one of the topics being covered in BankBazaar’s latest campaign ‘A to Z of Credit Cards’. Let’s take a look at some notable reasons that make credit cards a better choice for transactions over debit cards.
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Reward Points
One of the most popular perks of a credit card is reward points. Nearly all credit cards offer reward points on a variety of spends such as dining, entertainment, travel, shopping, etc. The calculation of reward points usually translates to 1 Reward point per X amount spent. E.g. 1 Reward Point per Rs.100 spent on various categories of spending. Some co-brand cards may also offer 2x or 5x accelerated reward points on transactions done on their website.
If you regularly shop online, order food online, travel frequently, or are loyal to a particular brand, co-branded cards of that particular brand can help you save on such transactions made online or offline. For instance, if you travel frequently via a particular airline, you can opt for the co-brand card of that airline to earn accelerated reward points and various other benefits.
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Joining benefits
Many credit cards offer a variety of joining or sign-up bonuses to customers. These benefits may range from reward points, cashback, complimentary memberships, free flight tickets, and gift vouchers, and usually help offset the joining fee charged. Some card issuers or banks also offer to waive the joining fee if the cardholder spends a certain amount using their card within a certain period.
Cashbacks & discounts
Credit cards offer attractive cashback or discounts to make your purchases more affordable. While some of these benefits are offered all year round, card issuers tend to ramp up their offers during the festive season to attract buyers. By crediting a percentage of the transaction amount back to you, or knocking it off the transaction value, credit cards can help you make your purchases more affordable.
Cashback and discount percentages usually range from 1% to 15% of the transaction amount and are offered in various categories such as utilities, grocery, entertainment, dining, travel, and more. Fuel surcharge waiver is another popular type of cashback that many cards offer that can help save on fuel costs.
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Transaction Safety
Rewards and perks aside, credit cards allow for safer transactions compared to debit cards. This is mainly because credit cards come with robust consumer protection features such as the option to dispute charges following an unauthorised transaction and fraud protection. Debit cards, on the other hand, may not have similar protections to offer.
Help improve your credit score
One of the most important reasons why a credit card may trump a debit card is that it can help you build and improve your credit score. This 3-digit score is crucial to your financial health and can determine your access to credit. If you wish to build a credit history, get a credit card and use it responsibly by keeping a low credit utilisation ratio and paying your bills on time. The same applies if you want to improve your credit score too. In comparison, debit card usage is not reported on your credit score and will not help you build your credit score.
Widely accepted
While debit cards are accepted widely in India, credit cards are more widely preferred for many offline and online transactions. The best example of this would be online streaming services which require users to register a credit card to avail of the service. For overseas transactions, credit cards are the preferred choice given their safety and wider acceptance.
