Credit Card or Debit Card – Which Is Better For Investing

The mantra for a good financial health is to save money from income and then go about your monthly expenditures. However, we know that inflation, as well as the standard of living, is increasing day by day, thereby eroding the value of your savings. Thus, it becomes crucial to start investing your money. Also, nowadays people also keep credit cards, so that they always have their finances ready (in the form of credit) for almost every spends.

Thus, for investments we have two kinds of money, one is the money saved and invested through debit cards, another is the money borrowed and invested through credit cards. But how to invest through these two mediums and which one is better? We analyze both!

Investments through Credit Cards

• Purchase Stocks
  • If you are well versed in share marketing, then this could be a good option. Buying and selling stocks in equity markets can give you unparalleled returns! However, you cannot directly purchase stocks through credit card.
  • You shall have to use the Credit Card advances option, to withdraw money, then deposit it into your Demat account and then invest in stocks.

• Use Cash Back from Credit Card for Investment
  • One of the perks of using credit cards is to get rewards and cash backs. The more you use credit cards, the more you shall receive cash backs and get it accumulated.
  • Now, the cash back money can be used to invest in say mutual funds or a PPF account. Regularly investing, even small amounts can yield big returns in a couple of years.
• Purchase Commodity
  • Investments are not only about stocks and shares, one can also use the credit card for purchasing commodities such as gold, artwork, rare collectibles.
  • These too qualify as investments whose value increase in the future can give you good returns.

Also read: Know These Tips before Investing in Mutual Funds

Investments through Debit Cards

Debit cards can be used when one wants to invest through his savings from income.

• Mutual Funds
  • Mutual funds are considered a bit safer than directly investing in the stock market because the former is managed by an expert fund manager to ensure that you get a sound return.
  • Thus, by linking your debit card to a mutual fund scheme, the regular supply of money goes directly from your account to the mutual fund. It is an automated process so no need to do the same manually every month or so. There are even some dedicated debit cards for mutual fund investments through SIP.
• IPOs
  • Investing in share market is actually secondary market. However, one can also invest in the primary market through Initial Public Offering.
  • By staying regularly updated with the market news, one can check for upcoming IPOs and accordingly purchase shares in the primary market and can sell in the secondary market at a higher rate!)
• Real Estate Investment
  • It is the fastest growing sector in India and definitely, you would not want to miss jumping onto the bandwagon! One can invest in an area which has a potential to grow in the next few years.
  • This way the value of the property will increase and one can reap the fruits by selling it later or giving it on high rent. It need not be a house, even a shop in such an area will give good returns. The risk is low and value continuously increases with time.

Also read: Some Golden Rules for Investing

Debit or Credit, which is a Better Card?

Investments through credit cards may not yield good returns because generally, the interest rates on credit card are much higher than the returns of investment. If one misses the repayment of a credit card, then credit score is hampered to a great extent. Also, not only are you investing money that does not belong to you, but you are also technically carrying a debt! All this can be avoided if one uses a debit card as a medium for investment. Hence, debit cards are much safer to use as you won’t have to worry about any sort of repayment and can keep your investments as long as you want.