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Impulsive buyer? Which card should you use?

By Larissa Fernand
January 28, 2005 09:03 IST
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So you figured out what each card is all about.

If you need to get your basics right on a debit, credit and charge card, read Credit or debit card: which do you want?

Which brings us to: which one should you take?

Unlike a credit or charge card, with a debit card, you are required to have an account with the bank issuing the card.

So if HDFC Bank offers you a debit card, you must have an account with HDFC Bank. But you need not have an account with HDFC Bank to have one of their credit cards.

Similarly, you need not have an account with American Express Bank to own an Amex charge card.

So which card should you take?

Situation: You can't be bothered with monthly bills.
Card: Debit.

Since the card allows you to have direct access to your account, payments are made directly. No worry about settling monthly bills. Great if you travel a lot or are just totally disorganised or plain forgetful.

Situation: You have a history of landing in debt.
Card: Debit.

Since the transactions are directly debited from your account, your credit line will be dependent on the funds in your account. Either the debit card will wipe you out or it will keep you in check.

But, fortunately, you will never end up in debt. If you don't have the money, the transaction won't be cleared.

Situation: A substantial bank balance.
Card: Debit.

Since the transactions are debited directly from your account, your credit line will be dependent on the funds in your account.

Situation: All your money is invested and saved and you have a very small bank balance.
Card: Credit.

Debit is out since you don't have much funds to debit instantly from your account. Should you overspend in an emergency, you can always revolve credit (or even sell some investments) to clear the bill.

Situation: You are having trouble getting a credit card because of a very low salary or not having a job.
Card: Debit.

Nowadays, banks normally give debit-cum-ATM cards to their customers. Since funds have to be deducted immediately from your account, there is no risk to the bank of you not paying your bills.

Situation: The company picks up all the travel and entertainment bills.
Card: Charge.

Since a charge card has no limit on spending, you can do your bookings, pay your hotel bills and other entertainment on your card. No preset limit to hamper your spending.

Situation: You are an impulsive buyer.
Card: Credit or Debit.

Both could work for or against you.

The good think about having a debit card is that you can only spend up to a particular limit. The limit is the money you have in your account. Try spending beyond it, and your transaction will not be cleared.

On the flip side, one massive spending spree could get your entire bank balance depleted, leaving you in the bread line.

With a credit card, you may end up spending right up to your credit limit with no caution whatsoever because you can pay the bill back over time. That is dangerous, indeed. But at least you do not wipe out all your money at one go.

When your credit card is your enemy
• Are you revolving on your credit card?
Want a free credit card?

Image: Uday Kuckian

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Larissa Fernand