5 reasons why credit cards are better than debit cards

Both credit and debit cards have significantly reduced the need to carry cash, making all types of transactions easier, whether online, contactless, or even offline payments. As a result, almost everyone—irrespective of the occupation, whether salaried or self-employed—now has at least one of these cards.

Debit cards allow consumers to spend the funds available in the bank accounts, while credit cards enable spends beyond the amount available in the bank account. That way, with a credit card, there’s no immediate deduction from the consumer’s bank account, whereas using a debit card results in an instant withdrawal. Moreover, credit cards come with several perks, such as rewards, cashback, lounge access, and insurance coverage, making them more advantageous than debit cards in many cases. In this article we elaborate more on the differences between these two, but first here is a comparison:

Credit Cards & Debit Cards: How do they Differ?

Basis of Comparison	Credit Cards	Debit Cards
Definition	A credit line offered through a card that requires repayment	A card that offers accessibility to the available funds in bank account
Who can Apply	Eligible applicants can apply even without a bank account with the card issuer	Is offered along a salary, current or savings account
Spend Limit	Users can spend only up to the pre-fixed credit limit	Users can spend up to the balance available in the bank account
Repayment	Involves repayment by the due date as per the statement cycle	Does not involve any repayment
Interest Charges	Includes interest charges only in case of late payment	No interest charges
Impact on Credit Score	Direct Impact	No Impact

Credit and debit cards function differently and have varying reasons why one should opt for them. However, credit cards have an edge over debit cards due to the following reasons:

1. Credit Cards are easy to avail and upgradeAs mentioned in the table above, a debit card is tied directly to the cardholder’s bank account, allowing access to funds for payments and cash withdrawals. In comparison, a credit card can be availed of by anyone with a good credit score or history, even with a non-existing relationship with the card issuer.

This independence from a bank account not only makes it easier to get approved for a credit card but also offers users a greater opportunity for upgrades and the ability to choose from a variety of card options from multiple lenders. With a debit card, however, the chances of upgrading to a credit card are limited, depending largely on the type of savings account and relationship with the bank. Thus, availing of and upgrading to a better credit card is easier if you meet the necessary income and eligibility criteria.

2. Credit cards can help improve/build credit score

Since debit cards are not a credit instrument (unless you have opted for a loan against a credit card), they do not add to anything on your credit history. On the other hand, credit cards can directly influence the cardholder’s credit score based on the repayment, credit utilization ratio, credit length, etc. If used smartly and wisely, a credit can even have a positive effect when the bill is paid on time and in full with a healthy credit utilization ratio. Therefore, using a credit card responsibly can be an effective way for individuals to build or improve their credit score, especially for those who are new to credit and have no credit history. That way, users seeking loans in the long term can start using a credit card to have negotiable interest rates and a good credit profile.

3. Credit cards are safe and secureIn comparison to debit cards, credit cards are loaded with better security features that include purchase protection and zero liability in case of loss or theft. This means that if a credit card is lost, stolen, or used for unauthorized transactions, the cardholder’s liability for fraudulent charges remains zero.

Further, since credit card transactions don’t lead to an immediate deduction from the user’s bank account, there is no direct loss of funds in case of misuse. Additionally, if an inappropriate transaction occurs, one has enough time to report it to the issuer or authorities before the statement is generated and the due date arrives. In contrast, with debit cards, the risk of fraud is comparatively higher and more immediate, as any unauthorized spending results in a direct deduction from the bank account, leading to an instant loss of funds.

Having said that, it’s always important to promptly report a loss or damage to your card issuer or bank by contacting their customer service.

Also Read: How to tackle fraudulent transactions on your credit card?

4. Credit cards come with rewards and cashback benefits

Similar to credit cards, some debit cards also offer rewards and cashback benefits, but the range and value back are not too extensive. Generally, credit cards offer a much greater return via rewards or cashback.For example, the SBI Platinum Debit Card offers 2 SBI Rewards points for every Rs. 200 spent on dining, fuel, shopping, travel bookings, or online payments. In comparison, the SBI Simply CLICK Credit Card offers up to 10 reward points for every Rs. 100 spent. Some credit cards even offer higher rewards in selected categories. For instance, the IDFC FIRST Millennia Credit Card gives up to 10X rewards for spends above Rs. 20,000 per billing cycle, with unlimited points that never expire.

In addition to this, credit cards also come with complimentary perks like discounts, bonus rewards, complimentary memberships, and lounge access, which can be more extensive compared to debit cards. For instance, in addition to rewards, SBI Simply CLICK also offers Amazon vouchers worth Rs. 500, e-Vouchers worth Rs. 4,000, and a 1% fuel surcharge waiver, among other benefits.

5. Credit cards have a better scope of savingsThough most credit cards offer general rewards or cashback, there are some cards with benefits to specific categories, designed to reward users on their major spend types such as fuel, travel, shopping, and online purchases. Thus, choosing the right credit card based on the spending habits can lead to significant savings.For instance, a travel credit card might be the best choice for someone who travels frequently. Here as well, if travel is mostly domestic, one can find cards offering benefits like domestic lounge access, railway surcharge waivers, or hotel memberships. At the same time, for international travelers, cards come with features like international lounge access, lower foreign exchange markup fees, etc.

Some credit cards also offer extra benefits through co-branded partnerships with popular brands. Examples include the Standard Chartered EaseMyTrip Credit Card, Amazon Pay ICICI Credit Card, and Flipkart Axis Bank Credit Card. Users also have the choice to opt between a reward or a cashback credit card as per their preferences.

In addition to the choice of card selection, credit cards also offer multiple redemption opportunities for rewards points—such as for cashback, product catalog, travel bookings, or even air miles. In contrast, debit cards offer limited options for maximizing savings.

Ultimately, choosing the right credit card tailored to the spending patterns allows you to maximize benefits. The more you spend, the more you earn, so selecting a card that aligns with your lifestyle and redemption preferences can help you save more. However, eventually a credit card is a loan that needs to be repaid back.Therefore, it is important to maximize benefits to align with not just the spending patterns but also the repayment ability.

(Disclaimer: Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)