Many questions are asked on debit and credit cards like, when should i use it, what is the difference between a debit and credit card. All these questions will be answered when we know the real difference between a debit and credit card.
Both offer more than a way to access cash or money without having to carry around cash. These cards carry either the symbol of VISA or MASTER CARD on them and are used widely in India.
While transaction through a credit card adds a line to your credit side, use of debit cards pulls out money from your saving account directly instead of allowing you credit. Debit cards are also commonly known as ATM cards.
Credit card will allow you to use bank or financial institution’s money to make purchase while you make the payment later. It’s a kind of loan given by a bank or financial institution in which, month end purchases are totaled and bills are sent to the customer’s address for payment.
After receiving the bill or statement, customer makes payment to the bank or financial institutions.
Problem with credit card is higher interest if dues are not paid within the due date. If you use your credit card wisely then you can be benefited with the cash back or money back offer or even can get gift coupons.
In case you find any suspicious transaction in your credit card then you can take up this matter with the issuer by which charges against you will the withdrawn.
This will not be possible in case of debit card. If its misused by someone then after a thorough investigation bank may replace your lost money.
At the month end, credit card holder will be getting a statement for purchases that are made by using credit card where as in case of debit card, you do not get separate statements for purchases. You have to look into your bank statements to identity the transactions that you have carried on during the month.
Payment of your bills before the due date can improve your credit history compare to usage of debit card which has no effect on your credit score. But please remember, non payment or delay in payment of credit card bills can affect your credit history based on which your loan applications are approved.
Table showing the difference between Debit and Credit Card
|Debit or ATM Card||Credit Card|
|About||Digitized versions of check books where it will be linked to your personal bank account. Money is directly debited or withdrawn from the bank account as soon as the transaction occurs.||Offer a line of credit or interest free loan if paid in time. It’s not connected to a personal bank account. You need to settle the bill before the end of the due period when statement or bills issued to you.|
|Source of funds||Money used from your bank account||Small loan borrowed from a bank or financial institution from where you have taken the credit card|
|Interest||No interest as transaction amount is directly withdrawn and no need to pay it further.||If dues are not paid before due date then interest will be levied based on the bank from where you have taken the service.|
|Reward Points||Do not get any reward points for transactions||Gets reward points or cash back offers on each transactions|
|Monthly Bill or Statements||No||Yes|
|Spending Limit||No, Based on balance in your account||Yes, monthly spending limit will be assigned based on credit card holder’s credit history and settlement records. It will be increased or decreased from time to time.|
|Credit History||No impact on credit history||Use or credit card and settlement before time can improve card holder’s credit rating, which helps in getting loan.|
|Security||Less Secured, if any fraud transaction taken place or in case of miss use, it will be very difficult to reverse the transaction unless its proved that it’s not done by you.||More Secured, in case of fraud transactions or miss use of you card, you can deny payments. It will be up to the bank or institution to prove that it’s done by you. In this way you will be protected and your money will not be blocked.|
Now you know the difference between debit card and credit card. Please let us know which card you prefer to use and why. Please share your useful thoughts in our comments section below.