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Credit Card Vs. Debit Card

Difference between Debit and Credit Card

Last Updated 27th Jan 2022

Credit Card Debit Card
Credit cards allow the cardholders to purchase goods and services on credit and pay it back over time. In case of a debit card,‭ ‬the amount is instantly deducted from your bank account.
You have the option to convert your credit card purchases into EMIs. No credit facility is available,‭ ‬as you pay instantly from your funds.
Provides better security in case of faulty transactions Provides less security in case of faulty transactions
Typically offered with joining and annual fees Typically issued free with your savings account.
The penalty is charged on non-payment or late payment of your credit card dues Penalty charges are not applicable in case of debit cards.
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    What Is A Debit Card And Credit Card‭?

    Credit and debit cards, popularly known as plastic money have undoubtedly become the most popular cash alternative in the modern world. Be it a businessman or a salaried employee – most people nowadays carry at least one of these cards and use them for transactions like bill payments, grocery shopping, flight bookings, etc. However, there continues to be a raging debate on which should be preferred. While some prefer credit cards for their convenience, many believe that debit cards offer more security.

    What Is The Difference Between Credit Card And Debit Card‭?

    While both the cards look similar in appearance,‭ ‬they function differently.‭ ‬A debit card is linked to the bank account of the customer and hence,‭ ‬once swiped,‭ ‬the amount is directly deducted from the bank account.‭ ‬Credit card,‭ ‬on the other hand,‭ ‬allows the cardholder to purchase goods and services on credit and pay it back over time.‭ ‬This card is issued by the banks on the basis of the credit history and eligibility of the customers.

    • Usage: A credit cardholders pay the due amount after month one month, whereas debit cardholders money gets deducted from his/her bank account the moment they make a purchase.
    • Credit facility: As the name says, a credit cardholder gets an opportunity to convert purchases into EMI, whereas no such facility is provided to a debit cardholder.
    • Security: Credit card is a safer option in case of fraudulent activity because they come with protection against fraud and debit cards are not that safe because the amount gets deducted instantly.
    • Fees and Charges: Debit cards usually comes free when an individual opens a bank account, while an individual has to pay a joining fee and annual fees to get a credit card.
    • Credit score: Defaulting on credit card payments can impact individuals credit score while there is no question of credit score in debit card because no credit is taken there.

    Why is Credit Card A Better Option Than A Debit Card‭?

    ‬Gives short term interest-free credit:‭ ‬When you swipe your debit card,‭ ‬payment is instantly deducted from your bank account. ‬However,‭ ‬in case of a credit card,‭ ‬the payment is done by the bank to the vendor and no amount is charged from the cardholder.‭ ‬The cardholder can repay the amount within the grace period which can go up to‭ ‬45-50‭ ‬days without requiring to pay interest during this period.

    • ‬Helps to improve CIBIL score:‭ ‬A good credit score has become the basis for loan eligibility and approvals by all the other financial institutions and banks.‭ ‬Timely payment of all your credit card dues goes a long way in improving or building your credit score.‭ ‬But make sure to pay your credit card dues on time,‭ ‬otherwise,‭ ‬it can reduce your credit score. Regular and disciplined usage of credit card is typically is the first step towards building a credit history for a first-time borrower
    • Rewards and cashback:‭ Credit cards offer various kinds of rewards to the customers such as air miles,‭ ‬fuel points,‭ ‬free gifts,‭ ‬cashback rewards,‭ ‬etc.‭ ‬In the case of debit cards,‭ ‬such rewards are a rarity as most debit cards are not part of reward programs.
    • ‬EMI Facility:‭ If you buy a product using a debit card,‭ ‬you are liable to pay the entire amount in one go.‭ ‬On the other hand,‭ ‬if you are using a credit card,‭ ‬you have an option to convert your purchases into EMIs‭ (‬Equated monthly instalments) ‬of up to‭ ‬24‭ ‬months.‭ ‬However,‭ ‬you have to pay an interest of approximately ‬1%‭ ‬to ‬2%‭ ‬every month on the outstanding amount along with additional charges such as service tax
    • ‬Protection from fraud:‭ ‬Credit cards provide better security in case of lost/stolen cards or fraudulent transactions.‭ ‬Most of the credit cards have liability protection feature which protects the cardholder from any unauthorized transaction.‭ ‬Moreover,‭ ‬you also benefit from the chargeback option and protection plans.‭ ‬These features are not available on a debit card.‭ ‬If a fraudulent activity takes place,‭ ‬the amount is instantly deducted from the debit card.
    • ‬‬Purchase protection:‭ Credit card gives you the opportunity to withhold payment in case you find any defect or problem with the product purchased.‭ ‬By contacting the credit card company and disputing the charge,‭ ‬you can prompt an investigation that could potentially result in a refund.‭ ‬In the case of a debit card,‭ ‬there is zero liability protection for the cardholders.

    Disciplined swiping of a credit card can provide huge financial benefits to the cardholder.‭ However, if you risk using the card without disciplined repayment, then better stick to debit cards.

    When Is Debit Card A Better Option Than A Credit Card?

    Like credit cards,‭ ‬debit cards have their own benefits too and can be your preferred payment option in certain situations.‭ ‬Using a debit card entails utilizing your own money and promotes spending within your means.‭ ‬You do not run the risk of missing your credit card bill and end up paying high interest on your spending.‭ ‬Moreover,‭ ‬some hotels and facilities don’t allow booking using a credit card,‭ ‬and hence,‭ ‬debit cards act as a saviour for you.‭ ‬Nowadays,‭ ‬banks offer many rewards and benefits with your debit cards as well,‭ ‬thus making them as attractive as credit cards.

    Disciplined swiping of a credit card can provide huge financial benefits to the cardholder.‭ ‬Compared to this,‭ ‬a debit card allows you to take a measured approach towards spending and reduces your risk of landing up with high-cost debt.


    Is the debit card a safer option or credit card?

    Credit card is a safer option when compared to a debit card because the funds will not be deducted directly from your bank account and credit cards also come with protection against fraudulent activities.

    I do not wish to pay higher annual fees, which card should I opt?

    Credit cards usually come with a high annual and joining fees, however, debit cards charge nil-lower annual fees.

    What is a personal identification number?

    A personal identification number (PIN) is a four-digit unique number using which a credit or debit cardholder can make a transaction from an ATM. An individual can also get a mini statement, withdraw, and check balance.

    Is there any transaction limit on the amount that can be withdrawn using a debit card?

    Yes, there is a limit set by the banks on the transaction to be done in a day. The transaction limit for every bank is different and card type is also different, generally, the limit is set between₹ 15,000 - ₹ 2 Lakh

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