We all have been using debit cards and credit cards while doing different kinds of financial transactions. But, have you ever analysed the exact difference between these two cards. If not, we shall take you along to explore What is a Debit card? What is a Credit Card? What is the difference between a debit card and a credit card?
Both, debit card and credit card are provided for your convenience. It’s up to you to utilise them in the best possible manner and make wise financial decisions. Debit and credit cards relieve us from the stress of carrying large amount of currency in our pockets.
But, there are certain crucial points of difference that one should know. The same have been discussed below in detail.
What is Debit Card?
A debit card is a payment card that gives access to your own money. This simply means, whenever you make a purchase either online or offline, the amount gets debited from your own bank account. So, through a debit card you primarily spend your own money that you already have in your bank account. No interest is charged since you haven’t borrowed anything but you are using your own money.
A debit card allows you to easily withdraw cash from ATMs. You can swipe the cards at various merchant outlets and avoid carrying large amount of cash in your pocket. Since, debit card is linked to your bank account, this helps you spend within your own financial abilities and keeps you away from any unnecessary debts.
What is Credit Card?
On the other hand, Credit card lets you borrow money just like you get a personal loan. You are offered a line of credit and you can spend as per the credit limit that you have received. Interest is charged if you don’t pay your credit card bill on time.
When you pay through a credit card, primarily the bank is paying on your behalf and you become the bank’s debtor. The same gets charged to your monthly credit card bill and you have to clear the same before the respective due date.
The usage of a credit card including timely payments impacts your CIBIL or credit score. So, you should regularly pay off your credit dues in order to improve your CIBIL or credit score.
Debit Card vs Credit Card: Key Differences
The most important thing that sets apart a debit card from a credit card is debit card gives the access to your own money kept in your bank account. While credit card offers you a line of credit which you can utilise as per your needs. Credit card is connected to the bank or financial institution that has issued the card. It can be different from the one where you have your bank accounts.
We have summarised the key differences between a debit card and credit card in the table below:
| Features | Debit Cards | Credit Cards |
|---|---|---|
| Meaning | Debit card allows you to spend the money you already have. | Credit card is a line of credit offered similar to a loan which needs to be paid back. |
| Connected to | Your own bank account. | The issuer bank or financial institution. |
| Bills | No bill is generated. | Monthly bill is generated. You have to clear it before due date. |
| Credit Limit | Cash withdrawal or POS limit might be there. But, some debit cards may not have it. | You are assigned a specific credit limit based on your individual profile. |
| Interest charges | No interest charged since no money is borrowed. | Interest is charged if you don't pay your card bill on time. |
| Credit score | No credit involved, so no question of impact on credit score arises here. | You need to use credit card responsibly. Not paying credit card dues can hamper your credit score. |
Debit Card vs Credit Card: Which is better?
It is advisable to use debit card wherever possible to save you from the vicious debt trap. Also, in terms of security debit cards are considered safer than credit cards. They carry a secure PIN which is highly confidential and shouldn’t be disclosed to anyone.
However, in the present scenario, digital transactions are gaining traction all around. So, you can’t deny the fact that credit cards have also become an essential part of our lives. Think of making purchases, paying utility bills, meeting your travel expenses or any other regular payments, your credit card is just there to simplify these transactions.
Further, Credit cards proves quite handy if you can learn to enjoy the privileges and rewards being offered. Some really attractive deals and offers keep running for various credit cards in India. You get to see a whole range of cashback and rewards credit cards that come loaded with amazing features and benefits and save some of your money. You need to analyse the same and grab the best credit card for yourself.
Having one or two credit cards for different purposes seems fine as far as you utilise them properly. Learn to use your credit card wisely and responsibly. Don’t skip clearing your monthly credit card dues.
Credit card is a friendly digital tool meant for your convenience. But, you often tend to get tempted towards overspending, this is what you have to control. If you can well handle it, there’s nothing to worry about. Just be very careful to avoid any misuse of your credit card.
Now, that you have gone through this exclusive comparison between a debit and a credit card. You can take a planned decision to avoid any unnecessary financial burden.
Which one do you prefer using frequently while shopping, a Debit card or a Credit card? Have your views changed a bit after understanding the difference between a debit card and credit card? Make sure to effectively take advantage of these cards.
View Comments (2)
Thank you so much for sharing such a great article. After reading your blog, now I know very well the difference between debit and credit cards.
The difference is that a debit card has a Visa® or Mastercard® logo on its face. When you use a debit card, the money is deducted from your checking account. With a credit card, you're borrowing money to be repaid later. ATM and debit cards allow you to use ATMs, a safe and convenient way to manage your money.