Gone are the days when you would have to carry wads of cash in your wallet. Debit cards and credit cards are probably the most convenient way to carry money without having to carry any money. They look similar, are accepted universally, and make for light travel. But carrying a credit card is like getting a small loan. In other words, you basically ask the bank to lend you the money you don’t have, but promise to repay in a month when you receive the credit card bill. A debit card, on the other hand, withdraws directly from your bank account, i.e. draws on existing funds.

If you are disciplined with respect to the payments and your cash flow supports your expenditure, a credit card is a preferred option. You get 45 days interest free loan plus bonus points. However, you will easily be trapped if you don’t make the complete payment before due date. Another benefit of using a credit card is that you get a snapshot of your expenses at the end of each month. You don’t have to maintain the expenses separately but the Credit Card Company will send you the statement which will have the expense amount, nature of expense and date when the expense was incurred. Few companies also offer analysis of expenditure.

However, use of debit card is preferred if you are not disciplined with respect to making payments. The reason could be lack of funds or just carelessness. In that situation, use of debit card is the most preferred option since the money is taken from your bank account.

Know your behavioural patterns when it comes to spending, it will help you make the right decision.