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We'll show you the difference between credit cards and debit cards so you'll know when it's better to use one over the other.
When you buy something using your credit card, you're borrowing money from your credit card provider to repay later. You may then be charged interest on what you owe if you don't clear your balance in full each month.
You're able to spend up to a certain amount on the credit card. This is known as your credit limit.
You'll get a monthly statement from your credit card provider, and this will list all your transactions. And, if you've spent money on the card, you'll be asked to pay the minimum amount towards your balance each month to avoid credit card charges.
When you use a debit card, you're spending your own money. The money automatically comes out of your bank account and you won't be charged interest to use it.
Keep in mind – if you make a withdrawal, or purchase, that takes you below your available balance in your bank account, you'll go into an overdraft and may be charged interest.
If you're able to pay off your debts without being charged interest, using a credit card has some advantages over a debit card.
With a credit card, you can spread the cost of big purchases. It also gives you more purchase protection than a debit card.
A chargeback – or refund request – is a credit card feature that protects consumers from fraudulent transactions, or even purchases they're unhappy with. In addition, merchants are not allowed to store a cardholder's personal details, making transactions even safer.
Unlike a debit card, a credit card is not connected to your bank account. And if you are to lose it, or you suspect credit card fraud, you might find that your card comes with fraud protection and lost card liability.
Some hotels, airlines and hire car companies may only accept credit cards for reservations and bookings. Your card's chargeback feature will protect you if you need to file a dispute claim with one of these merchants.
Credit cards that offer rewards, such as cashback and frequent flyer points, are some of the most popular. Every time you spend money, you'll earn points. These can be exchanged for rewards, such as dining, shopping vouchers and flights, as well as discounts on fuel and family days out. The more you spend on the card, the more you can save – as long as you always clear your balance each month.
Using credit regularly, staying under your credit limit and paying off your balance in full each month helps to improve your credit score. Having a good score shows lenders you're responsible at repaying debt, which is important if you ever want to apply for a mortgage, or take out a loan.
Anyone who has a savings account will usually be issued a debit card, too. A debit card gives you quick access to your funds and enables you to pay bills, shop and check your balance. So when should you use it instead of a credit card?
One of the main differences between a credit card and a debit card is that you should always use your debit card to withdraw money from an ATM. Most banks will give you a few free ATM cash withdrawals before they start charging a fee. If you're an HSBC customer, cash withdrawals at HSBC ATMs and other banks' Visa ATMs in India are free of charge.
Your credit card should only be used for emergencies if you need a cash advance. You'll not only incur fees when you withdraw money, you'll also be charged interest on that money, even if you repay your balance as soon as possible.
Select HSBC Credit Cardholders can apply for the HSBC Cash-on-EMI feature. This give you a convenient way to borrow cash and repay in installments at a lower interest rate.
A debit card is versatile and simple to use. It allows you the convenience of paying for your purchases directly from your bank account, without having to carry much cash. And because the debit card is linked to your bank account, you can easily keep track of your spending online or through mobile banking.
But the best thing about a debit card is that, unlike a credit card, it's harder to rack up a serious debt. You can only spend what's in your account. Use your debit card for your day-to-day banking and save your credit card for when it's needed most (like a well-deserved holiday!).
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