Difference Between Credit Card and Debit Card


Credit cards and debit cards may look alike, but they work differently. A credit card is like a temporary loan from the card company, and you have to pay back what you spend. On the other hand, a debit card lets you use money directly from your savings or checking account. To make it clear how they affect our money, here's a simple comparison between the two...

Many young Indians, whether they're working or running their own businesses, usually have either a credit or debit card for everyday activities like withdrawing cash, buying groceries, paying bills, or making bigger transactions such as booking flights or purchasing durable goods. Despite using these cards regularly, not everyone is familiar with the main distinctions between a credit card and a debit card, or which one might be more beneficial. Here, we've outlined the key differences between the two:

Credit Cards vs. Debit Cards

Particulars Credit Card Debit Card
Impact on Credit Score Impacts your credit score directly No direct impact on credit score
Statements Billing statements for each cycle that includes all spends you make with the card No specific billing statements; Debit card spends are mentioned in the savings/current account passbook
Advantage Short term loan as per your credibility Saves you from debt-trap as you spend as per available funds
Purchases The card issuer pays for you purchases which you pay back by the due date You pay directly from your bank account
Spending Limits You can spend within your pre-fixed credit limit You can spend only up to the balance available in your savings or current account
Repayment Monthly Repayments No Repayments
Availability of Funds Borrowings from the card issuer Deductions from your savings or current account
Rewards and cashback Extensive in comparison to debit cards (may vary across card to card) Minor rewards and cashback benefits
EMI Facility Mostly offered on transactions above Rs. 2,500 (may vary across issuer) Offered on limited transaction as per vendor-bank agreement
Application You need to apply for a credit card with the issuer to have one Often offered along a savings/current/salary account
Interest Include interest rate charges in case of late payment No interest charges are applicable
Important Fee & Charges Joining fee, annual fee, late payment fee, interest charges, etc Cash withdrawal fee, annual fee (in some cases), etc
Additional Privileges
  • Lounge Access
  • Lost Card Liability Cover
  • Higher Cash Withdrawal Limits

Based on our analysis using the comparison table, note that:

  • Getting a debit card is easier than getting a credit card because you only need to meet the eligibility criteria set by the provider for a debit card, whereas for a credit card, you have to fulfill specific eligibility criteria set by the provider.
  • Credit cards are safer than debit cards if they get lost or stolen, or if there are unauthorized transactions. If someone uses your debit card fraudulently, the money is taken out of your account right away. But with a credit card, you don't lose any money if there's fraud. Just make sure to call the customer service of the card company right away if your card is lost or misused.
  • Paying your credit card bill on time can boost your credit score. However, if you miss the deadline, it will lower your credit rating. On the other hand, using a debit card doesn't affect your credit score because it's not a credit tool.
  • The main difference between a debit card and a credit card is where the money comes from and how much you can spend. With a debit card, the money comes directly from your savings or current account, so your spending limit depends on how much you have in those accounts. But when you get a credit card, a separate account is opened for you. The spending limit on this account is determined by the lender based on things like your credit score, how much credit you're using, and your income. So, a credit card lets you spend more than you have, while a debit card limits you to what's in your account.
  • With debit cards, the money is taken directly from your savings or current account, so there's no need to make repayments. But with credit cards, you have to make monthly repayments based on your purchases. You can choose to pay the minimum amount due, a bit more than that, or the full outstanding amount each month. You'll have a set due date by which you need to make this repayment. Remember, you can pay your credit card bill within a grace period set by the issuer, usually around 45-50 days.
  • Credit cards come in different types, offering rewards like air miles, fuel points, lounge access, and cashback. These perks are usually not as extensive on debit cards, if they exist at all. Using credit cards wisely can help you earn more points, which you can then use for future transactions. For instance, some banks offer air miles cards that reward you with miles based on your card spending. You can later redeem these miles for free flights, rides, or hotel stays.

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