What’s The Difference Between Credit Card and Debit Card?

When you go out to shop or dine or just hang out, you might have noticed that credit and debit cards are accepted at all these same places. You might have also been confused about the difference and the usage of the same but the similarity between them is that they both offer ease and comfort by eliminating the requirement to carry cash at all times. They even look similar to each other but there are many differences between the two.

So before we jump on to the difference, let us first understand what exactly these two are all about.

Debit Card

Is issued by the bank which is holding your bank savings or current account and with the help of this debit card, you can pull the money out of the ATM anytime you want. You can use it whenever you are making transactions such as while shopping groceries from the departmental store, dining out at the restaurants and while shopping online as well. Since it is directly linked to your bank account, it is important to have enough cash in your account if you want to use your debit card. The money is directly deducted from your current account whenever you make a transaction. All you need to do is enter your PIN and you are good to go.

Credit Card

On the other hand, credit cards are not linked to current accounts of any bank but it offers a credit facility which allows people to buy anything they want. The limit of the credit card is fixed depending on the credibility of the individual and the payment has to be done within one month of the purchase at the end of statement cycle. The individual also gets an option of creating Easy monthly installments of the amount due but then that has to be paid along with the accrued interest of the same. If you pay the amount quickly, you would have less interest to bear.

Now coming on to the differences of the same

  • With Debit cards, only the funds available in the account of the individual can be used to make payments or transactions whereas,in order to make transactions with credit cards, a particular credit amount is available.
  • For Debit cards, the funds have to be deposited by the individual whereas,with credit cards, the funds are made available by the credit limit as is pre-fixed by the lender.
  • In case of debit cards, interest is earned in case money is available in the account whereas,in case of credit cards, interest is levied on the balance which is outstanding and yet to be paid back.
  • There is no EMI facility on debit cards whereas it is available on credit cards.
  • No repayment is required in case of debit cards but in case of credit cards repayment of the outstanding amount needs to be done. It could be done by paying the minimum value or the entire value in a lump sum and also in order to avoid any kind of late fee charges.
  • The account holder of the bank can obtain a debit card but in case the applicant wants to obtain the credit card, they first need to meet the eligibility criteria and basis the credit history, CIBIL score and income of the applicant a credit card is issued.
  • With debit cards, there are no reward points connected as such but with credit cards, there are reward points which you can redeem for your use. These could be redeemed in form of cash or some other scheme such as flight bookings and so on.
  • The main advantage that comes with debit cards is that there is a zero risk of overspending and they help you to stick to your spending limit but when you have a credit card in hand, the risk of excessive spending arises which leads to huge credit card debt.
  • Fraud protection in case of a debit card is very low as compared to credit card.
  • To obtain a debit card, there is no check of credit history but in case of credit card, credit history and score is checked.

Conclusion

Come to think of it, both of these cards are suitable for different kinds of situations. Credit cards are particularly useful in case you have a control on your spending capability and finances whereas with a debit card you can only transact using the money you already have in your account and therefore, your spending limit is restricted to the money in your account. In case of a credit card, be sure to pay the debt on time or else you will be stuck into another debt.

So whenever you are planning to obtain a credit card or a debit card or both, consider all the differences mentioned above.

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