Difference between Credit Card & Debit Card: Both debit and credit cards are used to make payments or write a check or cash withdrawals. The main difference between them is where the money to pay for the purchase comes from. Credit cards and debit cards look almost the same with an expiration date, bank name, EMV chips, 16-digit card numbers and magnetic strips. The major difference between a credit card and a debit card is using a debit card, you can spend the money which you already have in the bank, with a credit card, the bank lends you money to use which you can use and pay them back with interest every month.
Here we are giving credit cards vs debit cards, the advantages and disadvantages of the cards, which card is better, and many more in one place.
- What is a Credit Card?
- Major Difference between Credit Card & Debit Card
- Advantages and Disadvantages of Debit Cards
- Pros and Cons of Having a Credit Card
- Should I Choose a Debit Card or Credit Card?
- Is an ATM card debit or credit?
- Can I use a credit card at an ATM?
- Which is better credit card or a debit card?
- What are the advantages of credit cards?
A credit card is a bask-issued card to fulfil the financial needs of the customers. Using this card, users can lend money from that particular financial institution and need to pay the money back with interest as per the institution’s terms. Credit cards are issued in the below-mentioned variety of categories.
- Usually, standard cards extend a line of credit to their customers for making buying items, balance transfers, and cash withdrawals, and they don’t have annual charges.
- Premium credit cards offer perks like concierge services, special event access, airport lounge access, and so on, but they have a higher annual fee.
- Reward cards offer travel points, cash back, and other advantages based on how the user spends the amount.
- Secured credit cards need an initial cash deposit that is held by the issuer as collateral.
- Balance transfer cards have low introductory interest rates and fees on balance transfer between other credit cards.
- Change cards have no preset spending limit but they don’t allow unpaid balances to carry over from month to month.
Credit cards have plenty of advantages like discounts, travel pers and so on that debit cards do not have.
We have to take both debit and credit cards from a particular financial institution and use them. Later, compare their bills to know the major differences between credit card and debit card. Here in the below table, we have covered everything regarding debit card vs credit card.
|It deducts the amount directly from the user’s current or savings account.
|It allows cardholders to make payments even if they don’t have an account balance. Permits you to borrow funds to pay for the purchase.
|Your particular bank savings or current account.
|Credit is extended by your card issuer. It provides access to money.
|You can spend the amount only you have in the bank.
|You can spend more than what you have
|Offered along with the savings/current/salary account.
|You have to apply for a credit card.
|Can spend the available balance in the account.
|You can spend within your pre-fixed credit limit.
|Who pays for the purchase
|Cardholder pays for the purchase.
|Credit card company pays the vendor for purchase instantly. Later you have to pay the credit card company.
|There is no extra payment you have to make as you are using your own funds.
|A bill needs to be paid monthly as it is being borrowed.
|There is no bill or statement.
|You will get a bill or statement containing the details of the transactions you made.
|Fees and Charges
|Annual fees are applicable.
|Various applicable fees include joining fees, annual fees, late payment fees, etc.
|No interest is charged.
|Interest is charged on the borrowed amount if it is not paid before the due date.
|You will get minimal rewards.
|Enjoy the air miles, cashback, and reward points which can be redeemed.
|Limit to Funds That Can Be Accessed
|You can access any amount up to what is currently available in your savings or current bank account.
|Use the money only up to the pre-set credit limit on your card.
|Doesn’t have many privileges.
|Comes with various dining, entertainment, retail, and travel privileges.
|Lost card Liabilities
|Provides protection from theft or loss of card.
|Most cards offer 100% lost liability protection.
|Offered on limited transactions as per vendor back agreement.
|Mostly offered on transactions above Rs 2500.
A debit card is nothing but a payment card that makes payments by deducting money directly from the user’s account. Here we are giving the pros and cons of debit cards in detail.
- There is no debit involved as you are using your own money.
- Debit cards are cheaper to use as there are no interest rates involved.
- It can also be used as an ATM Card. So you can withdraw money from the ATM.
- It doesn’t help in building a credit history.
- Approval for a debit card is easy as well as fast.
- Debit cards can complicate your passbook balancing at the end of the month if you don’t keep track of spending.
- You don’t have the ability to leave disposable cash in your account as the money is directly debited.
- There is little protection when it comes to debit card fraud.
- You will be charged if you withdraw money from a different bank ATM more than the advised number of times.
Now you know the differences between credit card and debit card. Here we are giving the advantages and disadvantages of opting for a credit card.
- Credit cards allow their users to spend more than the amount they actually have in their accounts.
- If users are unable to pay the bill before the due date, then you are provided with an opportunity to change the purchases into EMI, however, you will be charged interest.
- You can pay the amount spent for purchases in a billing cycle at a later date, which is the payment due date.
- Most online sites provide attractive credit card offers on purchases, which is best for online shopping.
- Making the bill payment by the due date helps you build as well as maintain a healthy credit score and credit history which can also be helpful in getting loan approvals in the future.
- You can even earn reward points on your credit card purchases which can be redeemed against gift vouchers, cashback, discounts, and more.
- Few credit cards offer additional benefits like airport lounge access, insurance cover, interest-free loans, indemnity cover, etc.
- If there is a fraudulent transaction with your credit card, then you can notify the bank and not have to bear the liabilities as the transaction will be reversed immediately.
- Credit cards have additional charges like annual fees, joining fees, interest charges, late payment fees, etc.
- Deferring on your bill payments can incur heavy penalties or interest charges.
- Non-payment of your bill on time can negatively impact your credit score.
- Going overboard your credit limit could lead to an accumulation of debt.
By reading the above lines, you can know credit cards and debit cards come with their own advantages and limitations. Here we are giving a few instances where you can choose to use a credit card or debit card based on their advantages and disadvantages.
- Withdraw Cash – Debit Card: When you withdraw cash using a debit card, you are taking your own money, so there is no expense involved. However, if you use your credit card to withdraw the amount, you are withdrawing the one you don’t have. The bank will consider this as a kind of loan which need to be paid with high-interest rates.
- If you have spending issues – Debit Card: It goes without saying that if you can’t control how much you spend, use a debit card. As the money is deducted from your current or savings account, you are less likely to overspend and get into credit card debt.
- To make a big ticket purchase – Credit Card: Actually, credit cards offer you the convenience of being able to split transactions into EMIs. It makes a good option to make big-ticket purchases since they become more affordable.
- Shopping or making transactions online – Credit Card: Credit cards offer more rewards, and offers during online shopping. If you found any fraud, then you can immediately contact the bank and block your card. Moreover, you can easily get the amount reserved to your credit card when compared with a debit card.
- For a vacation – Credit Card: Mostly, credit cards are universally accepted. So, you can use a credit card when you are overseas and not have to worry about having foreign currency in hand.
As there are many similarities between a debit card and a credit card, there as many differences as well. Hence it is advised to research based on your short-term and long-term requirements and select the better one.
FAQs on the Difference between Credit Card & Debit Card
ATM card is a debit card.
Yes, you can use a credit card in the ATM machine.
Both credit and debit cards come with their own advantages and disadvantages. We are suggesting you make the proper research based on your needs on which one to choose.
The advantages of owning a credit card are easy access to credit, EMI facility, building a line of credit, minimum due trap, and so on.
Both credit and debit cards look similar, but their pros and cons are very different. When building credit and cashing in rewards is important for you, then credit cards are essential tools for your financial journey. If you want to keep a tight rein on your finances, then it is better to choose a debit card. No matter what you choose, make sure that you know the pros and cons associated with it.
Here provided difference between credit card & debit card are helpful for account holders to choose which is better and many. Stay in touch with our site to know more pin-generation techniques.