Avoid getting debt trapped. Review on Debit Vs. Credit Cards

To begin with, let us first understand what the two types of cards are, and then we will analyse the pros and cons of each.

A credit card as the name suggests, is a card through which you can settle the establishment from which you may have purchased some merchandise / service, but the money would need to be paid to the card issuing bank at a later date.

A debit card is a card which is linked to your bank account and your bank balance reduces the moment you approve a payment on your card.

The benefits of a debit card vis-a-vis a credit card are

1) You would never end up overspending because the moment you overshoot your bank balance, the payment will be declined.

2) The implication of this is that you do not have to pay the astronomical interest charges on your expenses. Nor do you have to pay any late payment charges. So, in all it induces some financial discipline and also goes easy on the pocket.

The sole advantage of credit card is that in an emergency, you have access to a greater quantum of funds.

I belong to the school of thought which propagates that a person should not borrow for consumption as that spirals into a debt trap in the long run. Borrowing should be limited to investment purposes where you can earn at a rate higher than the interest rate at which the money is borrowed. Hence, my personal preference is for a debit card. However, a person should have both the card cards, but credit cards should be used only in an emergency.