Pros and cons of using debit and credit cards

After demonetisation drive, there has been commendable uptrend in the usage and issuance of debit and credit cards.
 
These cards are issued when you open an account in a particular bank. The debit card, however, is a compulsory service that is given to customers, but in case of credit card it depends on various eligibility criteria like payment scale, salary, etc.
 
Debit Card
 
Debit card lets you access money in your own account in two ways. Firstly via an ATM card for immediate withdrawals of cash, and secondly, as a check when buying an item. The payment is directly debited from your bank account like savings or current.
 
Transaction in debit card stood at 1,002.30 million in volume terms - aggregating up to Rs 2.86 lakh crore in November 2017 - higher compared to the transaction of 797.82 million in volumes totalling up to Rs 1.56 lakh crore in November 2016.
 
Credit Card
 
A credit card has become an indispensable part of our lives with its ease of use and convenient pay-back option. This card is offered by lenders to those who fulfil various eligibility criteria.
 
Many banks also offer various discounts and deals that a credit card offers are unmatched by any other financial products. It may be noted that credit cards can become a debt traps if not used correctly, or if you spend more than you can repay.
 
Also when you make a timely payment of the outstanding amount, your credit rating, and consequently your credit score goes up. Similarly, any delay or default in the payment will downgrade your credit score.
 
Credit score is as important factor, as the lenders take into this account before approving your loan application.
 
Usage of credit which stood at 98.31 million in volume terms - having value of Rs 26,699 crore in November 2016 - have increased to 116.4 million in volumes - valuing up to Rs 39,585 crore in November 2017.
 
Considering the usage of these digital platforms, we need to know what are their pros and cons.
 
According to BankBazaar report, the advantages and disadvantages of using debit card are:

Pros

• No need to worry about late fees or interest charges as you are using your own money.
• Impossible to get into debt, as the highest amount you can spend is limited by your account balance.
• Cash withdrawal through debit card is not charged.

Cons

• No rewards, cash back or points earned on purchases.
• No redressal available for fraudulent debit card transactions.
• Inability to build credit score, making it difficult to get a loan in future.
• Inability to purchase items whose value exceeds your account balance.
• Most banks charge you debit card fees. 

The report also highlights merits and demerits of using a credit card.
 
Pros

• Helps you build credit score.
• Rewards you with points, rewards, cash backs etc.
• Allows you to seek redressal for any fraudulent purchases.
• Most credit cards (entry level) are free.
• Allows you a grace period to make the payment.

Cons

• Easy to fall into debt as you can easily go overboard with spending.
• Heavy interest rates and fees charged if you fail to pay the bill or pay late or partially.
• Late payments will ultimately affect your credit rating.
• Cash withdrawal attracts high interest.

As per BankBazaar, if you are looking to buy a high value item like LCD TV, both the cards can be used. With a credit card, you can enjoy reward for the purchase, a grace period for paying the bill, as well as the facility to convert the amount into EMI.
 
On the other hand, for debit card, it states that you don’t have to worry about late payment, interest charges and risks of default. But you must have the required balance in your account, failing which the transaction would be declined.