The 3 C’s: Credit Card, Debit Cards & Cash

quotation-02Cash Is Kingquotation-01

You must have heard this at some point in your life, but what does it mean? This means cash is the most easiest asset to work with. You need it for business, for household purposes, for emergencies and practically any transaction. For e.g. Tomorrow for buying a meal you cannot offer gold, or a car, or insurance, you will have to give money or cash. And cash  doesn’t necessarily mean paper notes but it also includes coins, bank accounts, cheques, credit cards and debit cards. 

So which one works for you?  

If you are not a fan of carrying hard cash or a checkbook everywhere because of safety reasons you should carry a credit card or even a debit card around because its as good as carrying cash without the burden of actually roaming around with it. Besides giving you access to cash, these cards also offer other banking facilities.

Debit CardDebit Cards:

Debit cards are like digitized versions of a checkbook, linked to your bank account. Most debit cards can be brought for free with your savings account and you can switch it to a current a/c too. They can be used conveniently to withdraw cash from ATMs, make monthly bill payments or swiped at shops to buy something or pay for a service somewhere (provided that place has a Point-Of-Sales machine).

What’s a Point-Of-Sales/POS machine? It’s one of those things that you see everyday but don’t know what its called! That’s a POS machine: Arrow


Money gets deducted from your account:

Whenever you swipe your card, or withdraw cash the money from you bank account gets deducted. That’s why a debit card lets you spend only that much money that you have in your bank account and not anything above that. Think of a debit card like a virtual wallet, you can only spend whats in it. 

PIN Number for Security:

Debit Cards have a PIN number which is like a key to your card. You have to type in this 4 digit PIN number whenever you’re swiping your card or withdrawing money from the ATM. But losing your card can make it easy for someone to swipe it and steal money from your account. So always remember to ‘BLOCK’ your card through the bank’s Netbanking/Mobile Banking facilities when your card gets lost or stolen

Further if money has already been deducted from your account then report that fraud immediately. The longer you wait to report the fraud, the more
likely you will be held liable for your own losses. So if you ever get a message saying some amount from your a/c has been deducted and you’re NOT the one making those transactions then immediately report it.

Inexpensive to use:

Debit cards are inexpensive to use. Unlike credit cards, debit cards
don’t charge annual fees. But your debit card might have some ATM charges for withdrawing money from an ATM of another bank, make sure to read up on those charges.

Summary: Debit cards are always preferred because it helps you keep a track on your spending and you don’t overspend or get into debt.

giphyCredit Cards:

Credit cards are different. They allow you to borrow money, with the promise you’ll pay it back at the end of the month, but if you fail to do so you’ll be charged a fee in the form of interest  They are like a postpaid plan, you pay your bill monthly and debit cards are like prepaid plans!

DiscountsReward programs and online discounts:

Credit cards have the advantage of rewards programs but such cards
often require an annual fee to use. They also come with discounts while shopping online. For example: SBI card holders get discounts for card payments on Amazon. Besides, some places or products do not have Cash on Delivery option. For e.g. Booking a hotel room, or buying certain electronic products online.

Financial responsibility

This is a big factor in credit card use; it is very easy to overspend and then get buried
in overwhelming credit card debt at very high interest rates. Watch or read Confessions Of A Shopaholic to see how you can easily get carried away using your credit card.

Credit Limits:

Each card has a credit limit set by the credit issuer. These limits increase or stay the
same over time  depending on your ability and history of credit card bill payments.

Safety and security:

Though credit card frauds have increased in India the burden of the loss doesn’t fall on the user but on the company instead. Since money isn’t getting deducted from your account and you need to pay at the end of your month the loss falls on the company and not you. You rarely will be liable for the loss mostly if its more than Rs.50000.

Summary: Credit cards are good to use provided your diligent with your monthly bill payments.

Money MoneyCash:

Using cash can be a great way to avoid overspending. You can choose exactly how much you’re willing to spend and carry that amount with you, then stop spending when your wallet is empty. Cash is useful at places where you can only pay by cash. For e.g. buying groceries or vegetables at a market. However now these local vendors also have other payment options like Paytm. The biggest concern with cash is that if cash is stolen, it’s likely gone for good. 

So out of all the options which one to use where:

When to use cash Money Stack: You should always keep some cash in your wallet for emergency needs. For buying something from a small retailer try using cash or your debit card because it costs small business owners more to process a credit transaction over a debit card or cash transaction and this might cost you also more.


Which one to useWhen to use Debit Cards or Credit Cards: For online payments try making card payments where discount offers are available. This also helps for collecting points. Another advantage of debit/credit card is that you can keep an electronic record of your purchases and easily track your spending, see where your money goes, and even stick to a budget. 

Apart from that the smartest method of payment to use at any given time depends on two things: Your Situation, and Your Psychology.

For instance, you might want to use a credit card for dinner because you get airline miles for your purchase, and because credit cards have the most fraud protection of any option. Your friend on the other hand might pay by cash because she needs to pay off her loan taken for her car.

Take all the above factors into consideration and then decide whats best for you. If you’re still confused, ask us and we will guide you.




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