August 24, 2017
With the demonetisation move by the Modi-led government, the whole country all of a sudden has made a transition as to how they are making transactions. Well, we have to admit that the impetus for such a transition was the lack of money in the ATMs following the demonetization of high-value tenders, but the transition has been made and more and more people are resorting to cashless transactions - use of debit cards, credit cards, e-wallets and so on. While old timers might just stick to their ways of making cash transactions, and those holding credit cards will continue to make transactions without thinking twice about the balance left in their account, if you had to make a comparison between cash, credit and debit crds, it’s most obvious that the debit card leads the way when it comes to make safe transactions and safety in general. To enlighten you a little more on the subject, we’ve listed a few advantages of a debit card over cash and credit card and why you should keep it simple and make most of your transactions via your debit card.
This point takes into consideration the advantage of a debit card over a credit card. When using a debit card., one can make transactions only up to the point when there is money left in their account. Whereas, in the case of a debit card, most people make transactions using this card towards the end of their month- when they are cash strapped. In this case, the next month they would be required to set aside money to clear their credit card bill, and failing to do so would propel the interest on the credit. Of course, this is not always the case, as credit card users can make transactions smarty and prudently and clear their bills before the interest kicks in. If used in such a way, the credit card comes with a tremendous benefit, if not, the risk of falling into debt is always there.
When it comes to spending using cash, one has to make the calculations as to how much he/she has spent in the month manually and this sometimes can be a task as miscalculations are bound to happen. With a credit card too, with the high spending limit on offer by most banks, customers tend to spend more than what they can afford, leading to debt as they fail to pay their bill the following month. With regard to a debit card, the individual with the help of the transaction alerts knows exactly how much is left in the account and can spend wisely. One can even go through the e-statements to check the money in and out of their savings account - and make every rupee accountable.
When applying for a credit card, to be eligible the customer has to have a decent credit score - anything above 750. If not, the application is rejected by the bank. In the case of a debit card, one can get their hands on one as soon as they open an account with the bank - be it a current or a saving account. An annual fee is charged for the debit card but that too is affordable. The best part of holding and making transactions through a debit card is that one does not have to deal with clearing a bill at the end of the month. With a credit card, individuals have to ensure that they clear the bill in order to avoid a heavy interest. Failure to pay the bill and the individual will have to pay higher interest, a penalty for failure to make the payment on time and a drop in their credit score.
Having a debit card does come with fees and charges but much less than a credit card. Customers holding a debit card have to deal with the fact of penalty fees and interest charges if they fail to pay their credit card bill on time and over-limit fees if they surpass their credit limit for the month. With a debit card, all such fees are non-existent.
Yes, fraudulent activities such as skimming, phishing, hacking into one’s bank account and so on are on the rise, but in most cases, especially if you’re travelling from place to place, having money in your debit card is a safe option. For example, if one has all his/her savings in cash, losing their wallet means that they will go completely broke. If one loses his /her debit card, it can be blocked immediately and one can request for a replacement immediately - but the money in the account stays intact which is the primary objective of using a debit card when travelling. That said, it is just a myth than holding a credit card is safer than a debit card as they are both susceptible to hacking, skimming, phishing and so on. Customers need to take preventive measures when making transaction online or at merchant establishments to prevent such happenings.
Back then, most people got their monthly dues in the form of cheques, but this now is the slowest way to receive money in your account. Now, salaries are automatically debited in the account of the individual and can be used immediately for transactions and so on. For some, carrying around physical cash has not become a burden.
Rewards and cashbacks
Just like a credit card, with every transaction made by customers using their debit card, they can earn reward points that can be redeemed eventually to buy travel tickets, movie tickets, gifts and so on. When making online transactions as well, customers have cash back options, depending on the bank they are enrolled with, which will comes as quite a benefit in some cases.
All in all, holding and making transactions through a debit card is just a safer means than a credit card or cash. While cash and credit cards come with its own perks, making transactions using one’s debit card is just a safer option.