Are Credit cards better than Debit cards?

Blame it on the fear of credit default or the age-old Indian mindset that does not consider taking a loan a good option if one has cash Guard your credit card IElastic with plastic in one's account. Payment by debit cards in India is rising at a faster clip compared to spending through credit cards.

While data from companies involved in facilitating card payments show that there has been a rise in number of payments using credit and debit cards, RBI data available for the first seven months of the current financial year also validate claims of increased spending using plastic cards. However, it's the use of debit cards that's growing at a faster rate than credit card payments.

RBI data shows that during the first seven months of the current financial year (2008-09 ), payments through debit cards crossed 80% of the total transactions recorded in 2007-08 . Better even is the value of transactions through debit cards: 84% of the value of total transaction during the whole of FY08 was already achieved between April and October of FY09.

While nearly Rs 10,500 crore worth of transactions occured during April-October of FY09, during the whole of FY08, total spending through debit cards was a little over Rs 12,500 crore.

On the credit card side, during April-October of FY09, nearly Rs 40,000 crore worth of transactions were done, against Rs 58,000 crore done during the whole of FY08. That is about 69% of last fiscal's total transactions were achieved during the first seven months of the current fiscal.

"The main reason for this increased use of plastic for payment is the spread of debit cards in India," said Piyush Khaitan, VC & MD, Venture Infotek. "Consumers find that debit cards relieve them from the additional chore of drawing cash from ATMs. Now they can spend from the money parked in their bank account directly at the store," he added.

Data analysed by Venture Infotek, which offers end-to-end card payment processing solutions for 14 banks in India, showed that during the festive season in October, there was a 55% jump in the number of card transactions across the country, compared to the same period of 2007