Once we start earning, we acquire the financial freedom to fulfil many of our aspirations — a wardrobe makeover, buying a fancy purse, watch, smartphone and so on. And often, we opt in for a credit card too. I’m sure most of you can relate to this.
But in the bargain, ‘Are you turning a blind eye to your financial future?’
My friend, Priya, recently started earning and got a credit card. She believed that the card provided her with the ‘financial freedom’ to buy all that she wanted.
Within just over a few months, she became an impulsive spender. Recently, we met over for a cup of coffee, she discussed her credit card dues. I explained to her that using a credit card is not bad; it does have its features and benefits, but she should spend her money wisely.
It’s not just her; I have come across several people that do the same thing.
‘Why do people purchase impulsively?’
This is because, in this age of plastic money, we’ve forgotten to keep a count of our hard-earned money.
No doubt, compared to carrying wads of cash in your wallet, plastic money is safe, convenient, and a smart option. ‘But shouldn’t you handle your money carefully in the interest of your long-term financial well-being? ‘
In fact, a credit card and debit card look similar but have their unique feature and benefits. If you are an impulsive buyer like my friend Priya, using a debit card would make more sense as opposed to creating a mountain of debt by using a credit card.
Here a few reasons why you should use a debit card:
Controlled expenditure and avoid bad debt
A debit card provides you access to your own funds available in the bank account. With a credit card, you live on the credit provided by the bank and are obliged to pay at the end of the credit period.
You can track your expenses with a debit card, as with every swipe, the bank debits money from your account. When utilising your own money, you can have a better control over impulsive purchases and unnecessary spending.
If you shop with prudence using a debit card, you can earn an interest of 3–6% per annum on the balance saved in your account.
To keep costs low, you use your plastic money, a debit card is perhaps best suited, because either low or no fees are levied, unlike a credit card. This effectively helps you save money.
Widely-accepted and rewarding experience
Almost every cash transaction can be replaced with debit card payment, be it at a Kirana shop, swanky mall, or even online.
And the best part is each time you swipe the debit card, you are awarded attractive reward points, discounts, and other offers. Banks offer debit cards with distinct features that could address your needs help you save money.
Easy to get:
Once you open a bank account, depending on the type of your account, a debit card is made available to you.
Unlike a credit card, where you need to have a decent credit score to prove your creditworthiness, a debit card gives you faster access to your own money.
Secure and convenient
Carrying wads of cash attracts the risk of it being robbed or misplaced. Instead, a debit card is very convenient, and you can directly swipe your debit card over the counter at merchandise outlets. This stops you from doling out cash and eliminate the chance of an error while counting.
Every transaction is securely processed with a four-digit pin for a hassle-free experience.
In case, you need hard cash to spend, visit the nearest ATM and withdraw the amount you need.
To ensure the safety, keep your debit/credit card carefully and do not share or write down your card details anywhere or with anyone. Also while shopping online, do not store banking passwords or card pins on any website.
If you lose your debit/credit card, in order to prevent misuse, it is recommended to block/cancel the card/s.
Using a debit card can help you embrace financial discipline while earning you interest money. It will enable you to live within your means and curtail frivolous purchases. Since the money is debited directly from your own account, there will be no question of getting caught up in a debt trap.
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If you are in a credit card debt trap, I recommend you to signup for PersonalFN’s Free Financial Health Check-Up and we will pinpoint areas where you may need to work more to shape-up your finances.
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Author: PersonalFN Content & Research Team
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