• Credit cards Vs Debit cards - What really is the difference?

    Credit Card BYTES FROM OUR KITCHEN

    Over the years, banks have rolled out financial products aimed to make our life easier. From loans to savings account, every product has benefited us immensely. The banks changed the finance game with the launch of credit cards and debit cards years ago. These cards not only made life easier for the common man, it became a necessity. These cards eliminated the problem of having to carry bulks of cash and made certain transactions much easier. It really was astonishing how these tiny plastic cards changed the financial game. So the big question here is- Is there a difference between credit cards and debit cards? Yes, there is! Credit cards are very different from debit cards even though they seem to achieve the same purpose. Read on to know more about how a credit card is different from a debit card.

    Credit card

    A credit card is an electronic card issued by banks and lenders to customers. Credit card lets the cardholder make purchases on the card within a certain credit limit. The customer has to pay back the amount charged on the card within the due date stated by the bank. If the cardholder fails to make payment by the due date, the cardholder is expected to pay a certain amount as interest along with the overdue amount. The credit card isn’t linked to any current account and is just a credit line offered by the bank to the credit cardholder.

    Listed below are some of the most salient and generic features of a credit card:

    • The credit card lets the cardholder make purchases on the card and pay for it later as long as they spend within the credit limit.
    • The credit cardholder has the option to pay back the amount within the due date. If the cardholder does not pay back the amount within the due date, a rate of interest will be charged on the amount overdue on the credit card.
    • Credit cards come with various discounts and offers across a wide range of categories including dining, shopping, entertainment, etc.
    • There are different types of credit cards offered in the market designed to suit the different needs of credit card customers. Dining credit cards, Travel credit cards, Cashback credit cards, Rewards credit cards are some of the types of credit cards available in the market.

    Debit card

    A Debit card is a magnetic stripe plastic card that lets the cardholder to make purchases on the card. A debit card is directly linked to the bank account of the customer and the money spent on the card is directly debited from the cardholder’s account. The cardholder can also check their account balance, withdraw money, transfer money, and change account details with their debit card.

    Listed below are some of the most salient and generic features of a debit card:

    • A debit card is directly linked to the cardholder’s bank account.
    • The cardholder need not make separate payments for the amount charged on the debit card as the money spent on the card is directly debited from the linked bank account.
    • A debit card can also be used as an ATM card to withdraw cash from ATMs.
    • There is no question of interest payment when it comes to a debit card as the money spent is debited from the bank account.
    • Debit card can also be used to check account details, change account details, and much more.

    Differences between a credit card and a debit card!

    Listed below are the major differences between a debit card and a credit card.

    Factor

    Credit card

    Debit card

    Source of fund

    Line of credit offered by bank or financial institutions

    Money in the cardholder’s bank account

    Line of credit

    Carries a line of credit

    Has no line of credit attached to it

    Interest payment

    Interest has to be paid on the amount overdue on the card if it hasn’t been paid by the due date

    No interest is applicable as amount is debited directly from the bank account

    Credit limit

    The credit limit is determined by the bank based on the eligibility criteria of the cardholder

    The credit limit is the funds present in the cardholder’s bank account

    Linked to

    Is not linked to any sort of bank account

    Is linked to the cardholder’s bank account

    Promotions

    The credit card offers promotions from time to time that will let the credit cardholder avail discounts on various categories.

    There are no such promotions for debit cards

    Similarities

    We have seen the differences between a debit card and a credit card. Let’s look at the similarities between both the cards now.

    • Debit and credit cards are both made of plastic.
    • The cardholder can enquire balance with both the cards.
    • Every time the cardholder uses the card, an alert is sent to the cardholder regarding the transaction.
    • The cardholder needs to authenticate the transaction using a pin in both the cases.
    • The cards are either issued by the bank or financial institution.

    Which card should you get?

    Credit cards and debit cards are different and serve different purposes. It is important to have both cards in order to fulfil different financial needs. While a debit card let’s you use the money that you already have, a credit card lets you make purchase on a line of credit. A credit card is very helpful when you need to purchase something that you can’t afford at that moment. It is important to have a bank account with funds in order to use a debit card, the same way it is important for an individual to fulfil the eligibility criteria set by a bank in order to get and use a credit card.

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