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

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

“Cash Is King”

You must have heard this at some point in your life, but what does it mean? This means cash is the 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 cash. And cash doesn’t necessarily mean paper notes but it also includes coins and money in your savings bank accounts. 

So which one works for you?  

If you are not a fan of carrying hard cash or a chequebook everywhere because of safety reasons, you can carry a credit card or even a debit card. It is 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 Cards:

Debit cards let you do a whole lot of things and it is linked to your bank account. Most debit cards come for free with your savings account and you can switch it to a current account 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 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 every day but might not know what its called! That’s a POS machine: 

Money gets deducted from your account:

Whenever you swipe your card or withdraw cash at an ATM, the money gets deducted from your bank. That’s why a debit card lets you spend only the money that you have in your bank account. Think of a debit card as a virtual wallet, you can only spend what’s in it. 

PIN Number for Security:

Debit Cards have a PIN number which is like a key to your card. You have to enter  4 digit PIN or 6 digit PIN, 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 or call the customer card 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 and if they do,it is quite nominal. 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.

Credit Cards:

Credit cards are different. They allow you to borrow money, with the promise that 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!

Reward 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 e.g. SBI cardholders get discounts for payments on Amazon. 

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 it is more than Rs.50000.

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


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: 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.

When to use Debit Cards or Credit Cards: For online payments try making card payments where discount offers are available. This also helps in 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. 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 what’s best for you. If you’re still confused, ask us and we will guide you.




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Talkative, clumsy, punny, intuitive are just a few buzzes of this queen bee. An aspiring business journalist looking to find her throne in the corporate world.

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