What’s the difference between Debit Card and Credit Card? Which is Better and Why?

Want to know the difference between debit card and credit card? You are at the right place. I will help you to understand the difference between credit card and debit card in detail right here in this post.

Difference between Debit card and Credit card

The difference between debit card and credit card is a lot more than you can imagine. Not only do these cards look almost the same, but also possess a lot of similar functions.

A credit card allows the bank to lend you money so you can use it and pay it back with monthly interest. But, with a debit card, you don’t get any additional money than what you’ve already got.

You can only spend from the amount fixed in your account. 

Let’s first understand what a credit and debit card is and then take a look at their differences. 

What is a credit card?

A credit card is like an unsecured personal loan that is repayable in 20 to 50 days. You don’t need to pay the interest if you return the money within the due date.

If you fail, you might also get charged with a penalty along with interest.

What is a debit card?

Banks provide debit cards against your current or savings accounts. The money gets deducted from your account

if you use this card to withdraw cash from the ATM. The spending limit of the debit card is the same amount as the bank balance.

Difference between Debit card and Credit card

Term	Debit card	Credit card
Definition	A debit card deducts money from your current or savings bank account.	It lets you borrow money to pay for services or goods.
Fund source	Either current or savings bank account.	Card issuer extends the credit. It gives you access to money, which is a kind of short-term loan.
Spending advantage	You only get to spend as much as you have.	You can spend more amount if you want.
Who pays for the spendings?	Your bank account pays for your purchase	The credit card company only pays for your purchase, and then you pay the credit card company.
Bill	There is no statement or bill for debit cards.	You receive bills every month along with the transactions.
Payment	You don’t need to issue the payments if you use your own money.	You need to pay back the bill every month as it is loan money.
Fees and charges	Pin generation and annual fees are applicable	There are multiple applicable fees for credit cards including annual fees, bounced cheque fees, joining fees, late payment fees, etc.
Interest	No interest is charged.	Interest is charged if you are unable to pay the amount within the due date.
Amount of funds to be accessed	You can access the amount which is available in your current or savings bank account.	You can use the amount from your card up to the pre-set credit limit.
Rewards	Rewards are minimal	You can redeem cash back, air miles, and other reward points
Privileges	Doesn’t have any privileges	Has multiple travel, dining, entertainment or retail privileges depending on the card type
Lost card liability	Minimal protection for the loss or theft of the card	Credit cards offer 100% lost liability protection. You will not be charged for any unauthorized transaction

Debit Cards

Pros

● Here no debt is involved as you use your own money

● It is cheaper and affordable as you don’t need to pay additional money

● It works well as an ATM card and you can have money in your hands by withdrawing anytime

● It is easy to get approval for a debit card

Cons

● You cannot leave money in your account as you directly debit the money

● It can be complex to balance your passbook at the month-end if you don’t keep the record of your spendings

● Withdrawing money from different Bank ATMs might charge a fee

● Protection is very minimal for a debit card fraud

Credit Cards

Pros

● Credit cards are convenient and do not require you to carry cash with you all the time.

● It helps you build your credit score

● You get bigger rewards on this compared to debit cards

● They have a high credit limit and provide you with the flexibility to spend as much as you want

Cons

● You will be charged a high amount of interest if you do not pay the bill on time.

● Multiple fees come with credit cards

● Credit score can be severely affected if you miss out on a payment, which means you’ll have to work hard to compensate for it

● Despite the credit limit, you might be urged to spend more, which can lead to more debt.

Which One is Better?

Both credit and debit cards come with their own sets of benefits and shortcomings. However, it depends on when you should go for credit and when for debit cards.

If you are going through spending issues: Debit card

If you cannot manage or control your spendings, always choose a debit card. Money will be deducted from the current or saving account, which is less likely to get you into credit card debt or overspending. 

Withdraw cash: Debit card

When you use a debit card to withdraw the money, you get access to your limited cash without any added expenses. But if you get a credit card, you are withdrawing money that is not yours. It is considered a kind of loan that you will have to pay back with interest.

Shopping/ transactions online: Credit card

Always go for a credit card if you want to shop online. You can have your card blocked if you detect any fraud. It’s much easier to reverse money to a credit card rather than debit. 

While making a big-ticket purchase: Credit card

You get to split the transactions into EMI with credit cards. It’s more affordable to make big purchases when you have an EMI option. 

For a vacation: Credit card

Credit cards work universally. You can always use these if you’re overseas or unable to get hold of foreign currency. However, a foreign currency mark-up fee will be charged if you swipe the card overseas. 

Difference between Debit card and Credit card: Conclusion

As there are many similarities in both credit and debit cards, these also have quite too many differences. Both are suitable for different kinds of situations and requirements. Hence always do your research for a card, and then choose between the two. 

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Also See: Here’s How you can Transfer Money from Credit Card to Bank Account Instantly

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