Debit and credit cards, also referred to as “plastic money,” are financial tools that have successfully been an alternative to cash. Besides convenience, cashback, reward points, and secured transactions are just a few advantages that make these financial tools the preferred method for making transactions.
Even though they might seem similar, the truth is they are not. Let’s understand debit card vs credit card in detail.
A bank issues a debit card against your current or savings account. The first thing to remember about a debit card is that you can only use the money currently in your bank account. This implies that when you use your debit card to make a transaction, the money will be debited immediately from your current or savings account.
With a credit card, you borrow money from your bank and use it to make purchases. You also have a 30 to 45-day grace period, during which you won’t be charged any interest on the borrowed amount when you repay it. In addition, when you get a credit card, you receive a personalised credit limit that specifies the maximum amount you can use the card for.
The table below illustrates debit cards vs credit cards in more detail.
Attributes | Debit Card | Credit Card |
Usage | You can use the fund available in your current or savings bank account. | You can borrow funds from your bank. |
Interest charges | Not applicable | Interest charges are levied on late payments. |
Source of money | Current or savings bank account | Bank/Credit card issuing company |
Impact on credit score | No effect on credit score | Timely repayments ensure creditworthiness and elevate your credit score. |
Eligibility | No specific eligibility criteria are to be fulfilled. | Must fulfil specific eligibility parameters in terms of age, income etc. |
Spending Limit | As much is available in your current or savings bank account. | As specified by the bank/credit card issuing company. |
Variety of Cards | Yes | Yes |
Security | Safe transactions, however minimal security against lost card liability | Secure transactions, 100% protection against lost card liability |
Extra Perks | Minimal rewards and privileges | Reward points and privileges on travel, dining, shopping, entertainment and more. |
Cash Withdrawal from ATM | Yes | Yes but with Additional charges. |
Pros
Cons
Pros
Cons
Effective money management is essential for responsibly using your debit or credit cards.
Here are some tips to help you in the long run.
Also Read: Reasons to Prefer a Credit Card Over a Debit Card
A debit card and a credit card follow two different principles in terms of what they offer and how they function. Therefore, you need to opt for one that meets your requirements. Having said that, it is crucial to understand that effective money management is essential for responsibly using your debit or credit cards. Also, remember to keep track of your expenses to avoid getting into debt or overspending.
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