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Differences Between Credit Card And Debit Card Research Team | Posted On Wednesday, January 09,2019, 03:17 PM

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Differences Between Credit Card And Debit Card



A credit card is issued by the bank, so that the user can borrow funds to pay for goods and services. It’s simply borrow now and pay later. The cards are issued by the lending institution on a condition that the user will not only pay back the borrowed amount, but also the agreed additional charges incurred. The money borrowed using a credit card is known as cash advance. The issuer of the card pre-specifies limits up to which the user can borrow funds.  

Definition of Debit Card:

A debit card is also a payment card like the credit card issued by a bank, but unlike credit card, the money used for payments comes directly from the bank account of the user.  The debit card is linked to the savings/ current account of the card holder and uses the funds in these accounts for transactions. The user needs to have sufficient balance in his bank account to make successful payments using a debit card.

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SEE ALSO: How to Block And Unblock your Credit Card?

Differences Between Credit Card And Debit Card

Key Differences between Credit Card and Debit Card:

The table below illustrates the key differences between a credit card and a debit card:

                 Credit card

             Debit card

A user can make use of the existing credit in the credit card account to make transactions

A user of debit card can only make transactions by using the existing balance in his savings/current account.

The credit available in the credit card account is based on the credit limit set by the lending institution or bank

The funds available in the debit card account is based on the money deposited by the account holder

A person using a credit card must pay an interest on the outstanding balance

A person using a debit card need not pay any interest; rather he earns interest on the balance available in the savings/current account.

A user get EMI facility on credit cards

A user does not get EMI facility on debit cards

The user of credit cards needs to repay the money borrowed as cash advance by the due date

The users of debit cards do not need to pay back the money used in making transactions

Monthly credit card statement is send to the credit card user that contains details of the transactions, total bills, total credit outstanding, minimum amount due and due date

Monthly bank statement is sent to the debit card user

The applicant for credit card must fulfil some eligibility criteria. To get a credit card approved the applicant must have a good CIBIL score, a good repayment history and a transaction history with the bank.

A debit card can be availed by any person having a savings/ current account at the bank

The credit card holder must incur charges like joining fees, processing fees, annual fees, pre payment charges, and late payment fees.

The debit card holder will incur charges like processing fee, annual fee and joining fees.



SEE ALSO: Credit Card With Low Interest Rates

Differences between ATM card, credit card and debit card:

Listed below are the key differences between ATM card, debit card and credit card:

ATM card:

You have the ATM cum Debit Card. This card can be used to withdraw cash at the ATM and also pay for purchases/transactions. ATM cum Debit Cards can be used at POS (Point of Sale).

Debit Cards:

Debit cards can be used for both withdrawing cash at the ATM as well as for making transactions. The debit card makes the funds available by using the cash deposited by the individual in his/ her current/ savings account. Once the withdrawal is made, the money is debited from the savings/ current account of the user.

The user must have sufficient balance in the bank account to make transactions. If the users do not have sufficient balance in the account at the time of purchase, then the transaction gets declined or cancelled.

Some debit cards have the facility of cashback. Cashback is a facility through which the user gets a potion of the amount spent using the debit card. The cashback facility is not offered at all places. Generally the banks have tie-ups with retail chains that provide cashback on using debit card of a particular bank.

SEE ALSO: What Should one Check for in a Credit Card?

Credit cards:

A credit card enables the user to use the existing credit in the card, which is a kind of loan taken from the bank at the time of making a purchase. The money borrowed on a credit card is also known as cash advance, which means there is no real time deduction of money while making a purchase using a credit card.

The credit card offers a line of credit that can be used to make purchases. The user must pay back the amount borrowed. The user needs to repay the amounts due to the billing cycle + grace period. Credit cards can help improve the credit score by repaying credit card dues on time.

Credit cards also offer special benefits to the user. There are some banks that provide cashback on credit cards as well. There are other benefits like special offers and discounts on restaurants or merchandise purchases, access to airport lounges, frequent flyer miles and so on.

All the major banks offer credit cards and debit cards. Using these cards for payments helps people conduct transactions easily without the use of cash. This helps the user enjoy a better shopping experience, without having to worry about cash payments.

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