Banks are evolving each day. They make the best use of the technology available, to increase their profitability and customer satisfaction. For example smart cards, they have made life easier. You can now purchase on the go and even transfer money from one account to another. Moreover, you can also pay bills through debit cards and credit cards.
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A debit card is linked to your savings bank account or current account. It allows you to withdraw cash out of that bank account. You may also transfer money from your bank account to a retailers account on making purchases at malls or shops. You cannot withdraw or transfer funds if your bank account has zero balance.
A credit card is a credit instrument. It allows you to purchase anything and everything, up to a specific credit limit. The bank will lend money from which you can spend on things you want. You have to make repayments within the billing cycle + grace period. If you fail to do so, the bank will charge interest on the outstanding balance.
Table showing difference between a Credit card and Debit card:
1. Obtaining a Credit card is no simple task. You have to fulfill certain eligibility criteria. Factors like your CIBIL score, credit history, debt-to-income ratio, decide whether or not you can get a Credit card.
You can avail a debit card only if you have a savings or current account with a bank. There are no other eligibility criteria.
2. Credit card limit is determined based on your income, credit score and other factors.
A Debit card has no such conditions regarding the maximum limit. This is because a debit card is linked to your savings or current account and a little less than the amount available in your bank account, can be used.
3. In case of a credit card, interest is charged or levied for the credit amount that you have not paid back within billing cycle + grace period.
In case of a debit card, you will not be charged any interest on withdrawals and use of funds up to specified limits. In fact, banks pay you an interest on your account balance.
In case of a Debit card, you will be sent a monthly bank statement by the bank. This statement contains details such as your name, account number, opening balance, deposits, withdrawals, fees charged by the bank if any and closing balance.
5. A Credit card is a debt instrument. It can be used to avail small unsecured loans.
A Debit card is not a debt instrument. You cannot avail any loans against a debit card.
Ultimately, be it a Debit card or Credit card, it is advisable to use it wisely. After all, it is your hard earned money that you spend.
Be Wise, Get Rich.
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