Reasons to Choose Credit Cards Instead of Debit Cards
1. Flexible repayments: Credit cards allow cardholders to make the necessary purchases and defer payment until later. This feature of credit cards will enable cardholders to split their more significant expenses into easily manageable installments. Furthermore, with flexible repayments, customers can chalk out an effective budget and ensure timely repayment of their credit card bills.
2. Builds a credit history: Credit card issuers report the financial behavior of credit card users, such as their credit card usage and bill payment frequencies, to the national credit bureaus. The credit bureaus utilize this information to prepare credit reports for card users, known as credit scores. Every time a cardholder pays the bill on time, it enhances their credit score, thereby building a good credit history which increases their credit eligibility in the future. A prospective borrower with a reliable credit history will likely qualify for a larger loan at a potentially lower Annual Percentage Rate (APR).
3. Protects cash in bank accounts: Credit cards could offer better protection against fraud than debit cards. In the case of a fraudulent transaction via debit cards, funds are deducted directly from the debit cardholder’s checking account. Conversely, credit cards do not utilize money from the cardholder’s bank account; instead, cardholders can spend up to the credit limit imposed by the credit card issuer, and cardholders only need to repay their bill when the statement is due. Upon realizing that a fraudulent transaction has been made on their credit card, cardholders should inform the issuing bank immediately to freeze their card and launch an investigation. In many cases, the issuing bank may be able to reverse the fraudulent transaction, protecting the cardholder from any financial loss.
4. Better rewards and benefits: When it comes to earning rewards on everyday purchases, credit cards offer a more comprehensive range of options than debit cards. While some debit cards may provide cashback or reward points, their offers and benefits are limited compared to credit cards. Therefore, credit cards may be a better choice for customers seeking a more extensive selection of rewards such as air miles, discounts, and reward points to suit their lifestyle needs.
In conclusion, credit cards may be a better choice than debit cards in terms of repayment flexibility, building a credit history, fraud protection, and earning rewards. However, cardholders should assess their spending habits and lifestyle needs to determine whether a credit or debit card would suit them better. Credit cardholders should also be aware of their repayment capabilities to avoid overspending and landing in bad debt.
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