Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
  • Difference Between Credit Card and Debit Card

    Published on August 01 2017

    The differences between a credit card and a debit card are more than you can think of. Even though both cards often look the same, have many similar functions.

    The major difference is that with a credit card, the bank lends you money to use which you can use and pay them back with interest on a monthly basis. Whereas, with the debit card, you are spending the money which you already have.

    Credit Card vs Debit Card
    Credit Card vs Debit Card

    Debit Cards Vs. Credit Cards: A Comparison Between the Two

    Let’s take a closer look at the differences between credit cards and debit cards.

    Parameters Debit Card Credit Card
    Definition Deducts money directly from your saving’s bank account or your current account. Allows you to borrow funds to pay for goods and services.
    Source of funds Your savings bank account or current account. Credit extended to you by your card issuer. It gives you access to money you otherwise do not have (like a very short-term loan).
    Spending advantage You can only spend how much you have. Can spend more than what you have.
    Who pays for the purchase You pay for your purchase. The credit card company pays the vendor for your purchase. You pay the credit card company.
    Bill There is no bill or statement You get a bill or statement each month with details of the transactions you have made.
    Payment There is no payment that needs to be made since you are using your own money. A bill needs to be paid each month since it is being borrowed.
    Fees and charges Annual fees and PIN regeneration fees are applicable. Credit cards have multiple fees applicable. These include joining fees, annual fees, late payment fees, and bounced cheque fees among others.
    Interest There is no interest that is charged. Interest is charged on the outstanding amount if it hasn’t been paid by the due date.
    Limit to funds that can be accessed You can access any amount up to what is currently available in your savings bank or current account. You can use the card only up to the pre-set credit limit on your card.
    Rewards Typically, the rewards you get are minimal Get to enjoy cashback, air miles, and reward points which can be redeemed.
    Privileges Doesn’t come with many privileges. Come with numerous dining, retail, entertainment, and travel privileges (depending on the type of card you have).
    Lost card liability Protection from theft or loss of the card is minimal. Most cards offer 100% lost liability protection. So, you are not liable for any unauthorised transactions made.

    Pros and Cons of Debit Cards and Credit Cards

    Now that you know the fundamental ways in which debit cards differ from credit cards, let’s look at their pros and cons.

    Debit Cards


    • There is no debt involved since you are using your own money.
    • It is cheaper to use since there are no interest charges involved.
    • Serves as an ATM card as well, so you can use it to withdraw money from an ATM.
    • Approval for a debit card is easier and faster.
    • Doesn’t help build a credit history.


    • You don’t have the ability to leave disposable cash in your account since money is directly debited.
    • It can complicate balancing your passbook at the end of the month if you don’t keep track of your spending.
    • You may be charged a fee if you withdraw money from a different bank ATM.
    • There is very little protection when it comes to debit card fraud.

    Credit Cards


    • Credit cards are extremely convenient and prevent you from having to carry cash with you.
    • Credit cards help you build your credit score.
    • The rewards you earn are much higher than those on debit cards.
    • They provide you with flexibility when it comes to spending since they come with relatively high credit limits.


    • If you don’t pay your bills on time or in full, you are charged a high rate of interest.
    • Credit cards have multiple fees.
    • Missing a payment (even due to genuine reasons) could end up adversely affecting your credit score. You then must work much harder to build it.
    • While there is a credit limit, you could always be tempted to spend more than what you have. This leads to debt.

    So, Which One is Better?

    As you can see, credit cards and debit cards come with their own advantages and disadvantages.

    However, here are some of the instances where you can choose to use a credit card, or a debit based on their pros and cons.

    • If you have spending issues: Debit card
    • It goes without saying that if you can’t control how much you spend, to use a debit card. Since the money is going from your savings or current account, you are less likely to overspend and get into credit card debt.

    • Withdraw cash: Debit card
    • When you withdraw money using your debit card, you are gaining access to your own money, so there is no expense involved. However, if you use your credit card to withdraw money, you are withdrawing the money you don’t have. The bank will consider this as a type of loan which you will have to pay back with a high rate of interest.

    • Shopping or making transactions online: Credit card
    • Credit cards are your safest option while shopping online. If you detect fraud, you can always call your bank and block your card. Moreover, getting an amount reversed to your credit card is far easier than with a debit card.

    • To make a big-ticket purchase: Credit card
    • Credit cards offer you the convenience of being able to split transactions into EMIs. This makes it a good option to make big-ticket purchases since they become more affordable.

    • For a vacation: Credit card
    • Most credit cards are universally accepted. So, you can use a credit card when you are overseas and not have to worry about having foreign currency in hand. Do, however, keep in mind that when you swipe your card overseas, you will be charged a foreign currency mark-up fee.

    Even though there are many similarities between a debit and credit cards, there are many differences as well. Hence it is advised to research adequately and based on your short-term and long-term requirement, choose between the two.

    Frequently Asked Questions (FAQs)

    1. Which is a better credit card or debit card?

      Debit card and a credit card comes with their own advantages and disadvantages. It is advised to research based on your requirement on which to choose.

    2. Can my debit card serve as a credit card?

      No, the moment you swipe your debit card, the amount is automatically deducted from your account and hence, you cannot use it as a credit card.

    3. Can I earn reward points on debit cards?

      Yes, you can earn reward points on debit cards, but you earn more reward points with credit cards.

    4. Can I transfer money from my credit card to another account?

      No, you cannot use your credit card to transfer money to any account.

    5. Are there any limits on the amount that can be withdrawn using a debit card?

      There is a limit on the amount of money which can be withdrawn using a debit card. However, this limit often differs from one bank to the other. The daily limit of withdrawal is usually Rs.20,000.

    6. Is there a fee for using a debit card?

      Debit cards come with a minimal fee. However, most debit cards do not carry any kind of fee of usage. The debit cards which are premium in nature such as a Platinum card carry a fee.

    7. Are charge cards similar to credit cards?

      A charge card will help you become responsible with your spending as you need to pay the balance of the card every month. A credit card will allow you to keep a revolving balance and you can pay the amount over a period of time.

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