As per data sourced from the Reserve Bank of India, the credit cards in circulation touched an all-time high of 48.9 million in May 2019. It marks a 27% growth in the use of this payment card, as compared to last year. Despite Indians primarily leaning towards debit cards, the growing usage and dependence on credit cards indicates the boosted digital payments and expanding retail borrowers.
Subsequently, the total transaction values on credit cards have also grown by a significant 30% from Rs.4.6 lakh crore in 2017-18 to Rs.6 lakh crore in 2018-19. Much of the popularity of credit cards can be attributed to the difference between debit and credit card and the financial leverages that the latter offers.
Listed below are a few add-on facts that make credits cards a better preference over debit cards –
Fact 1: Convenient access to credit
Credit cards offer individuals with a line of credit, thereby ensuring that they do not need to strain their existing cash budget while making any hefty expenditure. Debit cards are only financial instruments which allow the user to access funds in their savings or other accounts, if available.
The credit limit on a card is pre-set and depends on the creditworthiness of a potential cardholder. Nevertheless, despite convenient access to a higher credit limit, individuals need to use a credit card wisely, to make the most out of the availed card.
- Timely payment of credit card dues.
- Refraining from spending above 50% of the total credit card limit.
- Choosing to set up direct debit options to pay the outstanding amount.
- Checking up on the credit card statements frequently.
Fact 2: Multiple financial benefits and facilities
The increased popularity of credit cards has made it a popular financial product among multiple financial institutions. However, only a chosen few reputed financers like Bajaj Finserv offer feature-rich credit cards such as the RBL Credit Card that provides users with the option to withdraw interest-free cash from ATMs. The grace period extends up to 50 days against a nominal processing fee.
With such a credit card, users can enjoy multiple other financial advantages including –
- Availing an emergency loan against the outstanding cash limit for an interest-free period of 90 days.
- Convenient EMI options for high-value purchases.
- Welcome reward points that can be later redeemed.
Such NBFCs also bring their existing borrowers an add-on financial leverage in the form of pre-approved offers. These offers ease the application process to avail financial products and are available on numerous financial products that include – credit cards, business loans, personal loans, etc. You can take a look at your pre-approved offer by providing a couple of essential details like your name and contact number.
Fact 3: Variants of credit cards based on the spending habit
One of the significant differences between debit and credit cards lies in the fact that credit cards come with multiple variants that can cater to the customised spending habits of individuals. Some such variants are –
- Fuel credit cards.
- Travel cards.
- Shopping credit cards, etc.
For those frequenting the roads often, fuel credit cards are ideal considering that it –
- Offers accelerated rewards points on fuel purchase from their partner outlets, and
- Ensures that cardholders enjoy the benefits of a fuel surcharge waiver.
On the other hand, travel cards offer card-owners with rewards points that can be redeemed against free flyer miles; shopping cards can fetch rewards points that can be later redeemed to get cashback and discounts at partner outlets.
Fact 4: Additional financial security against fraudulent activities
Finances transacted through a debit card are directly debited from the available funds. However, transactions or purchases made through a credit card are not instantly debited from the credit card user and can be reversed. There are multiple layers and entities involved in a credit card transaction. Any unauthorised activity if informed within 24 to 48 hours can be reversed and respective action can be taken.
Apart from all the difference between debit and credit card mentioned above, the smart usage of a credit card can improve your credit score considerably. It requires you to meet the minimum repayment amount whenever possible, keep the credit utilisation ratio within 50%, etc.