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Credit and debit cards have made our lives easy by enabling us to go cashless everywhere. Many of us do not understand the exact differences between a credit and a debit card. They look alike with a 16-digit number on it, expiry dates, and come with a pin code. Although the functionality of both credit and debit cards are somewhat similar, their purposes are different. Here, we shall analyse credit and debit card features, differences, and similarities.
A credit card is an electronic device issued by banks and it is used as a mode of payment. As the name implies, this card gives you access to money which is not yours, i.e. on credit, which is as good as borrowing money from a bank. Whenever you make a purchase on your card, the issuing bank will pay the merchant on your behalf. You have to pay back the money to the bank before the due date that is specified on your statement. The banks will also give a credit limit, you are allowed to purchase on your card within that credit limit. Some of the salient features of a credit card are given below:
A debit card gives you access to the money that is available in your account. You you can make online or offline purchases using this card and the money is immediately deducted from your account. You cannot charge your card beyond your account balance. Banks issue such cards to those who hold a savings or current account with them. You can check your account balance, transfer or withdraw money with your card. The features of a debit card are given below:
Credit cards are issued only if you satisfy the qualifying criteria specified by the bank. You must be at least 21 years old. Also, most banks in Singapore have conditioned that the minimum annual income to get these cards must be between S$20,000 and S$30,000 for Singaporeans and Permanent Residents. And, for foreigners the annual income requirement starts from S$40,000. Additionally, you should have all the documents required for it.
However, to get a debit card, you need to be around 16 years old and have a bank account. There is no minimum income requirement.
Credit cards often have an annual fee associated with them. Few of the banks in Singapore have waived off the annual fee for 1 or 2 years. They also have late payment fee, cash advance fee and interests, foreign currency transaction fee, etc.
Debit cards attract much lower annual fees or may be perpetually waived. Transaction fees are usually incurred for overseas transactions.
|Comparing Criteria||Credit Card||Debit Card|
|Relation with bank||Not necessary to have a savings or current account with the bank||Is linked to cardholder’s bank account.|
|Source of funding||Credit limit offered by banks||Amount available in cardholder’s bank account|
|Line of credit||Yes||No|
|Credit limit||Credit limit is based on the cardholder’s annual income||Not a credit product. Use is subject to availability of funds in savings/current account|
You can use this card under the following circumstances:
Below are the situations where you can use this card:
It is beneficial to own both these types of cards since they serve different purposes. A credit card can be very helpful when you want to purchase something that you cannot afford immediately. A debit card will give you access to instant cash if you have it in your bank account without paying additional fees.