Introduction
When it comes to managing the money, young individuals differ from earlier generations in several ways.
They prefer online banks to traditional banks, and they are at ease with mobile payments.
Further, most of them select to use debit cards instead of the best credit card in India.
Despite credit cards’ benefits, 7 out of 10 young generations say they would rather use a debit card than the best credit card in India.
There are some valid grounds for their apprehension about using credit cards, particularly if they have difficulties managing their expenditures in general.
While spending using a debit card may not appear to be a problem right now, it is not benefiting people’s finances in the long run.
In this blog, let us delve deeper into how credit cards might be a better solution for young people.
Difference between credit and debit card
Let us look at some difference between credit and debit card.
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Usage
The main distinction is that with a credit card, the bank lends individuals money that they can use & pay back monthly with interest.
On the other hand, using a debit card means they are spending money that they already have.
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Interest cost
Interest is imposed on the amount owed if not paid within the due date on a credit card.
Conversely, a debit card does not impose interest on the amount used as it is not borrowed.
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Spending limit
A person can only use a credit card up to the pre-set credit limit on their card.
A debit card, in contrast, allows withdrawing any amount up to the amount currently available in the savings or current account.
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Bill
Each month, a person will receive a bill/statement from their credit card company detailing their transactions.
Whereas there is no bill or statement with a debit card.
Why should young people move from debit to credit cards?
Young individuals feel comfortable using a debit card instead of a credit card as the money comes from their savings/current account.
Further, young users are afraid of going into debt if they use a credit card.
Here are a few reasons why young users need to move from debit cards to credit cards.
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Building credit score
When it comes to achieving some of life’s major milestones, such as buying one’s first house, car, etc., having a good credit score is crucial.
It is critical that individuals begin establishing credit as soon as possible to obtain a loan at the best prices.
When using a debit card to make a purchase, nothing is reported to the credit bureaus, and nothing, positive or negative, appears on the credit record.
However, when using a credit card (borrowed money), financial companies are provided with information about a person’s payment habits.
It will help a person boost their credit score if they pay on time and in full each month.
A track record of on-time payments can demonstrate to financial organisations that the person can handle additional credit in the future.
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Better rewards
A few debit cards offer incentives, and the rewards offered are also limited.
In contrast, credit cards offer significantly better benefits, whether a person is shopping for groceries, dining out or making a large purchase.
Further, credit cards also offer cashback, discounts, lounge access and points, and the points earned can also be redeemed for gift cards.
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Fraud protection
It may not appear to be a big concern to load thousands of rupees onto a debit card.
If the debit card is stolen, a person will be out of luck to get the money back.
If a thief gets their hands on the debit card information, they can use it to make fraudulent purchases.
Reporting the theft as soon as possible lowers the liability, but if the person waits too long, they may be held liable.
Conversely, with a credit card, the overall liability for any fraudulent charges is restricted, and they are not responsible for reimbursing the money.
Conclusion
Credit cards are not just a mode of payment; they can prove to be one of the best tools for managing finances.
Credit cards provide consumers with some extra benefits, making them a wiser choice for people looking for a secure spending option.
The stronger the credit history, the better loan rates a person will get.
This is why young users need to use credit cards rather than debit cards to make purchases.
While having a debit card on hand is fine, utilizing credit for regular transactions will help them create a credit profile and prevent fraud.
Further, understanding the difference between credit cards and debit cards can help a person decide which is best for their financial situation and future.
