Summary of this article
Debit cards keep spending within real limits
Credit cards offer perks but risk debt
Choose based on budget, goals, and discipline
Consumers often face a dilemma of whether to use a debit or a credit card while making daily purchases, placing online orders, or for bigger expenditures. The patterns of usage, and the very nature of the card can have a significant impact on your financial decisions.
Debit Cards: Spending Within Your Limits
A debit card ensures you always spend within your limits, since the card is directly to your bank account. So, any purchase made with a debit card means there is an immediate deduction of funds from the available balance in your bank account. As such, debit cards are best suited for daily spends on groceries, travelling, mobile recharge, and utility bill payments.
For example, if you have Rs 15,000 in your account, and you use Rs 3,000 for buying groceries, the money will get debited from your account instantly. This also ensures that your expenses for groceries, in this case, will get adjusted from your grocery budget that you would have set for the month. This way, debit cards contribute to building discipline in money management.
Debit cards also do not charge interest, as you are spending your own money. However, they won't build a credit record because no borrowing is involved.
Credit Cards: Borrowing With Perks
While using a credit card, one borrows money from the bank up to a certain limit and repays it later. Most banks in India provide a grace period between 17 and 50 days when no interest would be charged on the full payment of the statement amount. However, non-payment would attract interest at around 30-40.80 per cent per annum, depending on the card and the credit profile.
Building a credit history with credit cards is a beneficial alternative if credits are properly used. The cards also provide cashbacks, rewards, loyalty points, and award travel miles (depending on the card). Other advantages include purchase protection and insurance for some transactions.
Say, for instance, if you buy an airline ticket for Rs 25,000 using a credit card, you will earn travel miles and get insurance for the delay or cancellation of the flight. Paying the credit card bill fully within the grace period will also ensure that you can enjoy the benefit of paying later interest-free.
Credit Card Spending and Repayment Trends
Since the application of credit cards is an ever-expanding phenomenon, it is only natural to ask: What is the usage and repayment trend for credit cards? Total credit card spending touched Rs 1.84 trillion in April 2025, up 18 per cent year-on-year.
Outstanding credit card debt also rose, amounting to around Rs 2.90 lakh crore. Defaults are on the increase also. Credit card debt in arrears grew 44 per cent year-on-year to Rs 33,886 crore as at March 2025, indicating that nearly all of the users are having some genuinely serious issues with repaying balances in time.
The Debit Card Trend
Whereas credit card usage shows an upward trend, the debit card usage is trending downwards. Thus, the number of debit card transactions has dropped from around 4.95 billion in 2019 to 1.74 billion in 2024. This reduction is a clear indication that more consumers favour credit cards to complete their purchases, perhaps drawn to the rewards and the convenience of making payments at a later date, notwithstanding the higher costs should they not clear their balances on time.
How to Choose Your Card
Determining which card to use would depend on your financial goals and spending habits. If the goal is to stay out of debt, have strict budgetary control, and spend whatever is in cash, then a debit card will be your perfect choice. A debit card works well for daily purchases, small bills, and situations where you want spending absolutely certain.
A credit card is ideal for you if you can pay the balance off in full during the grace period, want to be considered while making bigger spends like electronic items, travel bookings, or online orders that provide cashback, miles, or insurance.
