{"id":6509,"date":"2019-11-22T00:19:57","date_gmt":"2019-11-21T18:49:57","guid":{"rendered":"https:\/\/gtm360.com\/blog\/?p=6509"},"modified":"2022-03-27T16:31:42","modified_gmt":"2022-03-27T11:01:42","slug":"credit-card-versus-debit-card-upi-a2a","status":"publish","type":"post","link":"https:\/\/gtm360.com\/blog\/2019\/11\/22\/credit-card-versus-debit-card-upi-a2a\/","title":{"rendered":"Credit Card Versus Debit Card \/ UPI \/ A2A"},"content":{"rendered":"

\"\"<\/a>Credit Card and Debit Card are both “cards”.<\/p>\n

Both are digital payment methods.<\/p>\n

Both are issued by banks.<\/p>\n

Both of them work on card rails owned by Visa, MasterCard, China Union Pay, RuPay and other card networks.<\/p>\n

Because of these similarities, many people tend to believe that there’s no difference between credit and debit cards.<\/p>\n

They’re wrong.<\/p>\n

Credit card offers several benefits over debit card:<\/p>\n

    \n
  1. Float From Deferred Payment<\/li>\n
  2. Rewards<\/li>\n
  3. Greater Fraud Protection<\/li>\n
  4. Lower Cost of Loss<\/li>\n
  5. Better Redressal Against Fraud<\/li>\n
  6. Credit History<\/li>\n
  7. Ideal for Emergency<\/li>\n<\/ol>\n

    Let me elaborate.<\/p>\n

    #1: FLOAT FROM DEFERRED PAYMENT<\/strong><\/p>\n

    When I pay with a credit card, I get 30\u201345 days to settle my bill. During this period, my money stays in my account and earns interest. In the industry parlance, I enjoy \u201cfloat\u201d.<\/p>\n

    When I pay with a debit card, the money leaves my bank account immediately. I lose interest.<\/p>\n

    #2: REWARDS<\/strong><\/p>\n

    I get reward points for my credit card spend. I can redeem these reward points for air tickets, gifts, and so on.<\/p>\n

    Very few debit cards give rewards.<\/p>\n

    The monetary value of rewards can be computed from the formula given in the following exhibit.<\/p>\n

    \"\"<\/a><\/p>\n

    #3: GREATER FRAUD PROTECTION<\/strong><\/p>\n

    Since he goes through the same security steps (e.g. CVV, VbV \/ MSC \/ OTP where applicable) for making both debit card and credit card payments, the common man tends to believe that debit card is as secure as credit card.<\/p>\n

    That\u2019s not true.<\/p>\n

    As you can see from the following table on ChargeBacks411<\/a>\u00a0website, in the event of fraud, credit card offers greater protection than debit card.<\/p>\n

    \"\"<\/a>
    Source: CHARGEBACKS911<\/figcaption><\/figure>\n

    According to Ted Rossman, industry analyst at\u00a0Master Life’s Financial Journey, \u201cIf you\u2019re saving debit card information and that gets hacked that\u2019s money missing from your account. That\u2019s a lot worse than your credit card. With a credit card, that\u2019s zero liability and it\u2019s not actual money that\u2019s left your account.\u201d<\/p>\n

    #4: LOWER COST OF LOSS<\/strong><\/p>\n

    Both credit card and debit card are equally susceptible to fraud.<\/p>\n

    But the similarity ends there.<\/p>\n

    When a credit card is used fraudulently, the fraudster steals money from the bank.<\/p>\n

    When a debit card is used fraudulently, the fraudster steals money from you.<\/p>\n

    If your credit card is used fraudulently, the charge is only debited to your credit card account. Since that\u2019s different from your bank account, you don\u2019t actually lose any money.<\/p>\n

    OTOH, if your debit card is used fraudulently, the money leaves your bank account immediately. Your bank balance falls unexpectedly. And, as we all know, when that happens, you get into all kinds of mess like bounced cheques, overdraft fees, and so on.<\/p>\n

    The important point to note is that, these problems are caused not just by premeditated fraud but even due to human errors such as when the wrong amount is entered into the POS terminal while swiping \/ dipping \/ tapping the debit card.<\/p>\n

    $hit happens in all payment methods, whether it’s caused by human error or premeditated fraud. But when it happens in Debit Card, FPS, NEFT, UPI, Zelle, or any payment method that\u2019s linked to a bank account, entire bank balance can be wiped out instantly.<\/p><\/blockquote>\n

    \"\"<\/a><\/p>\n

    #5: BETTER REDRESSAL AGAINST FRAUD<\/strong><\/p>\n

    \"\"<\/a>To reverse a fraudulent or erroneous credit card or debit card transaction, you need to file a dispute with the Merchant and \/ or Bank. But, when you do that, your money is still in your bank account in the case of credit card whereas, with debit card, it has already left your bank account.<\/p>\n

    As anyone with a basic understanding of human psychology will appreciate, it’s easier to wage the war to retain your money (credit card fraud) than to regain it (debit card fraud).<\/p>\n

    Besides, some banks (e.g. AmEx) reverse the charge on credit card disputes immediately. Click here<\/strong><\/a> to know more on this topic.<\/p>\n

    #6. CREDIT HISTORY<\/strong><\/p>\n

    You build a credit history by using credit card, but not debit card.<\/p>\n

    The traditional benefit of credit history is that it helps you qualify for loans and mortgages, should you ever need them.<\/p>\n

    There’s a new benefit of credit history: Jobs.\u00a0A number of companies are reportedly carrying out credit checks of potential employees, and rejecting “no file” and “thin file” applicants i.e. people with zero or minimal credit history respectively. So, no credit card could mean no job.<\/p>\n

    \n

    Yet another reason why people use credit card even though they have cash: Build a credit history so that their job applications are not rejected by companies that increasingly carry out credit checks of potential employees. https:\/\/t.co\/ett4ge62fP<\/a><\/p>\n

    — Ketharaman Swaminathan (@s_ketharaman) August 26, 2019<\/a><\/p><\/blockquote>\n