Being a fan of credit card and able to manage credit cards quite efficiently, I will compare credit cards over debit cards and help you understand why credit card scores highly over a debit cards and if you can control impulse purchases, how credit cards is one of the best financial instruments.
Credit cards are free but most of the debit cards have issuance fees as well annual fees. All the credit cards are not free but most of the cards are free and if they aren’t free, you have to make some amount of purchase each year to waive off the annual fees where as debit cards costs money every year.
2. Credit Score
Spend on a credit card and pay the amount before the due date and your CIBIL score can jump up but if you use your own money lying in your bank account to make a payment with a debit card, it will not tinker your CIBIL Score by a bit. That’s the part and parcel of the financial life we live in.
So to improve your credit score, you should be using credit cards and not but remember not to overdo it. Using significant percentage of the credit limit offered to you on your credit card can hamper your credit score as well. So spending on the credit card within the credit limit and paying off the dues within the due date is way to enhance your credit score.
3. Interest Free Money
Yes I agree that freely available money is a double edge sword and if are not using it wisely, can be real nightmare but if used wisely, you have free money at your disposal.
When I was salaried, I always liked the payment date to be very near to the salary date aka in the first week of every month but after being an entrepreneur, I prefer the date to be in the middle of the month because that is when I get the money into my bank accounts. On top of that, you pay your credit card bill at the end of the billing cycle, so your money continues to earn you interest in the bank account (though very little) and also serves as amount for the minimum balance at times.
Cash with credit cards is not possible (not literally but should not exercise that option as it is at a very high rate of interest) and so credit card is not a substitute for a debit card. Spend on a credit card where spending with a credit card is most beneficial than any other mode of payment.
5. Forex Payments
Debit cards cannot be used for payments in foreign currency but credit cards can be. Being an online entrepreneur, I make lot of payments in USD for my domains and hosting as well as for people that I hire through Elance. If you need to make payments apart from INR, you will need a credit card.
As you use more of your credit card for your daily expenses, you can earn more and more rewards like free air miles for frequent fliers or free hotel stays or coupon codes for purchase (one of my favorites) or even a cash back.
7. Bypass PIN
I am not a fan of using my debit or credit card pins in public and in credit cards, I like the idea of bypass the pin to make a payment. Some outlets don’t have the option to bypass the credit card pin but then I prefer paying cash instead of card. You may argue about why should the pin be bypass and though that is a different topic of discussion, the option to bypass credit card pin is because you may have international credit cards which don’t have pins as mandatory like we did not had it few months back.
I am more inclined towards credit cards but what are your views on it? Speak your heart out in comments below.