When I last checked, there were more than 900M debit cards and less than 50M credit cards in India.
Clearly, debit card outnumbers credit card. But that does not mean that debit card is more popular than credit card.
Just as
- There are more poor people than rich people in the world but that doesn’t mean poor is more popular than rich
- There are more foot soldiers than brigadiers in the army but that doesn’t mean foot soldier is more popular than brigadier
- There are more clerks than CEOs in a company but that doesn’t mean clerk is more popular than CEO
In fact, for reasons explained below, I’d argue that credit card is more popular than debit card.
“Popular” implies a strong preference. Nobody prefers being poor to being rich. Likewise, nobody prefers a debit card to a credit card.
The thing is, debit card is a right whereas credit card is a privilege.
If you have an account in a bank, you automatically get a debit card. Whatever you spend on a debit card is your own money coming out of your own account. Debit card is just another way of accessing your own money – just like writing a cheque or withdrawing cash from an ATM or teller at the bank branch.
Whereas credit card is license to spend the bank’s money. The license comes with no additional cost as long as you pay back your monthly balance in full. In addition, you earn interest on your money in the bank and also get several benefits like rewards, greater fraud protection, better redressal against fraud, etc.
When you can get paid for spending someone else’s money (credit card), why would you want to pay to use your own money (debit card)?
So, credit card is more coveted than debit card.
If debit card still outnumbers credit card, it’s because, unlike debit card, everyone won’t get a credit card – obviously no bank will allow every Tom Dick and Harry to use its money. Very few people, in the bank’s opinion, qualify for the privilege.
While people have a strong reason to prefer credit card, it’s not in their hands to get one – it’s the bank that decides whether someone gets a credit card or not.
Therefore, credit card is more popular than debit card even though the number of debit cards outnumbers the number of credit cards.
Now, coming to safety, both credit card and debit card are subject to the same security measures like CVV, OTP, etc. So the average person tends to believe that credit card and debit card are equally safe.
That’s a very simplistic belief and it fails to consider the end-to-end transaction cycle.
Credit card provides greater fraud protection and better redressal against fraud.
As you can see from the table cited in the following tweet, credit card offers greater fraud protection than debit card.
This table shows how credit cards are much safer than debit cards. https://t.co/Hk9eXWLnF5
— Ketharaman Swaminathan (@s_ketharaman) September 4, 2017
Besides, when a fraudster uses your credit card, he steals money from the bank whereas when he uses your debit card, he steals money from you.
If your credit card is used fraudulently, the charge is only debited to your credit card account. Since that’s different from your bank account, you don’t actually lose any money.
OTOH, if your debit card is used fraudulently, the money leaves your bank account immediately. And, as we all know, when your bank balance falls unexpectedly, you get into all kinds of problems like bounced cheques, overdraft fees, and so on.
The point to note is that, you face all these problems with debit card payments not just in the case of fraud but even in the case of human errors such as when the wrong amount is entered into the POS terminal while swiping / dipping / tapping the debit card.
PSA: $hit happens in payments, like in many other things in life. But when it happens in UPI, debit card or any payment method that’s linked to a bank account, entire bank balance can be wiped out instantly. pic.twitter.com/Ux3i9m1Bru
— Ketharaman Swaminathan (@s_ketharaman) February 20, 2019
It’s not only me.
According to Ted Rossman, industry analyst at Master Life’s Financial Journey, “If you’re saving debit card information and that gets hacked that’s money missing from your account. That’s a lot worse than your credit card. With a credit card, that’s zero liability and it’s not actual money that’s left your account.”
In the case of both credit card and debit card, you need to intercede with the Merchant and / or Bank to reverse a fraudulent or erroneous transaction. But, with credit card, the money is still in your bank account whereas, with debit card, the money has already left your bank account. Anyone with a basic understanding of human psychology will know that it’s much easier to retain your money (credit card fraud) than it is to fight the fight to retrieve your money after it has been lost (debit card fraud).
So, credit card provides greater end-to-end security than debit card.