What Makes Credit Cards Superior to Debit Cards?

In the 21st century, credit and debit cards have become necessary tools for financial matters. Both cards offer convenience and security, allowing users to purchase online, in-store, and internationally.

A credit card is a payment card issued by a bank that offers cardholders a line of credit to make purchases. Credit card holders must pay back the borrowed money to the bank or issuing authority within a given period. Credit cards can help in making large or sudden purchases, build a credit score, and earn rewards such as cashback or travel points. These cards are preferred by younger generations, such as Gen-Z or millennials, who like cashless payments and are interested in the rewards and benefits given by the card.

A debit card is a payment card that deducts money directly from a cardholder’s savings account when used for payments. Debit cards are preferred by older generations who like simple and hassle-free payment methods. They offer the convenience of cashless transactions but help people avoid debt.

Overall, both debit and credit cards are crucial in today’s world. All generations use them regularly for hassle-free and convenient cashless transactions. In several aspects, the two cards are similar, and in other factors, they have nothing to do with one another.

Differences Between Credit Cards & Debit Cards

Credit Card	Debit Card
Issued by the bank or any financial Institution for making payment by the bank on behalf of customers on any purchase.	Issued by the bank to its customers for making payments directly through the account of customers.
Interest is charged if payment is not made within the specified time.	No interest is charged.
The cardholder has to make the payment at the end of the statement cycle.	The amount is directly deducted from the cardholder’s account.
Credit cards will help a person build a credit history, whether it is good or bad.	A debit card does not affect credit scores.
To garner more and more customers, banks provide different rewards and benefits, such as good cashback, to the cardholders.	Debit cards offer limited perks and benefits to their customers.
Credit cards always entice their owners to spend more and garner the risk of staying out of budget.	A debit card helps a cardholder to stick to the budget and helps to stay out of debt.
A credit card allows a person to buy items on EMI and get loans with a good credit score.	No cardholder can get a loan on a debit card or buy items through EMI.
Credit cards offer better consumer protection through warranties and fraud protection but with expensive fees.	Debit cards offer less consumer protection but have a lower fee.

Why Choose Credit Cards Over Debit Cards?

Co-Branded Credit Cards

Many card issuers offer co-branded credit cards in collaboration with an airline, fuel company, shopping website, or digital wallet provider. These credit cards offer special discounts/offers on transactions at partner merchants. For example, ICICI Bank Amazon Credit Card earns cashback at an accelerated rate on purchases made on Amazon. Some travel credit cards also earn Reward Points as partner airline’s AirMiles, which are automatically added to the airline’s frequent flyer program at the end of the statement cycle.

Rewards and Benefits

Many credit cards, premium and super-premium credit cards in particular, apart from the reward points/cashback benefit, also offer several add-on benefits to the cardholders. For example, many credit cards offer complimentary access to lounges at airports/railway stations, complimentary movie tickets, complimentary membership to hotel/airlines’ loyalty programs, and many more. Debit cards, in most cases, do not offer any such benefits. However, some banks like Axis Bank and IndusInd Bank do offer debit cards that come with benefits like complimentary airport lounge access and free movie tickets.

Interest-Free Loan

Credit card payments are loans granted by the card issuer against a line of credit, which are to be repaid by the cardholder as the credit card bill by the payment due date, which is usually 20 days after the end of the statement cycle. If the cardholder pays the credit card bill in full by the payment due date, no interest is levied by the card issuer on the amount spent with the card in the given statement cycle. Therefore, if a credit cardholder is financially punctual, they can avail of an interest-free loan for a period of 30 to 50 days- 30 days on purchases made on the last day of the statement cycle and 50 days on the purchases made on the very first day of the statement cycle.

Emergency Fund

Owning a credit card is also a backup plan when unexpected things happen, and cash is required for urgent needs. A credit card is like a safety net in your wallet. When something urgent comes up i.e., a medical emergency, financial crunch, etc, a cardholder can always use it at that time but needs to pay it back to the bank, maybe with extra charges, as it is not free money. A credit card owner must use the card carefully, keeping in mind that the money used needs to be paid back.

Additional Security

Credit Cards are more secure than debit cards as most card issuers offer zero-cost liability protection against the loss of the credit card—that is, the cardholder is not liable for any fraudulent transaction made with the card after reporting the loss of the card to the credit card issuer.

Insurance Benefits

Many credit cards offer complimentary insurance coverage to their cardholders, such as personal accidental insurance, insurance against loss/delay/damage of flight check-in baggage, and insurance against loss of personal/travel documents.

Acceptance All Over the World

Credit cards like Visa and MasterCard are accepted worldwide. When traveling overseas using a credit card, the headache of currency conversion will be eliminated. However, you shall be charged a foreign currency markup fee. Credit cards are great for people who travel frequently, as the bank provides travel benefits like airport lounge access, discounts while booking a hotel, complimentary stays, etc. Using a credit card abroad provides security and convenience that cash does not.

Similarities Between Credit Cards and Debit Cards

• Credit cards and debit cards are forms of plastic money. Both provide cardholders with the convenience of cashless transactions.

• Both credit and debit cards can be swiped/dipped at offline stores to transfer the requested amount to the merchant. They can also be used for online transactions by entering the card’s credentials in the designated fields.
• Both credit and debit cards have a set of credentials—a 16-digit card number, expiration date, magnetic strips, EVM chips, CVV, and PIN—that are used to authenticate transactions.
• Credit and debit cards receive monthly statements in detail, which helps easily track a cardholder’s spending. The monthly statements will be either mailed by the bank or could be tracked through the bank’s website.
• Another similarity is the daily spending limits on credit and debit cards. Spending beyond a card’s credit limit is not permitted. There are daily and monthly spending caps on credit and debit cards.

Bottom Line

Credit cards offer numerous advantages over debit cards, making them a superior choice for managing finances in the modern world. With credit cards, users can build a credit history, earn rewards, and enjoy consumer protection that debit cards lack. The flexibility of delayed payments and interest-free loans provides added convenience, allowing for smoother budget management.

Choosing a credit or debit card depends on a customer’s financial preference. While debit cards have merits, such as avoiding debt and overspending, they lack the benefits and protection that credit cards provide. Travel benefits and access to personal loans are some of the perks a credit card provides.

By understanding the similarities and differences and which card is more beneficial between these two cards, cardholders can make informed decisions to manage their finances and achieve their financial objective.