Credit Cards vs. Debit Cards: Key Differences

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Debit and credit cards have made banking transactions simple and convenient. You can do everything without taking cash out of your account, including going to your favourite restaurants and shopping malls, as well as making online purchases. With 16-digit card numbers, expiration dates, magnetic strips, and EMV chips, credit, and debit cards are nearly similar.

With one important distinction, both can make shopping in stores or online simple and convenient. When you use your credit card to make a purchase, you are taking out a short-term loan rather than using your own money. The elements that are taken into account while determining the maximum amount of credit include credit history, paying ability, income, and debts. When you spend money with your debit card, on the other hand, you are spending money that you own because it is directly linked to your current (checking) account or savings account, thus once the money is spent, it is gone.

In your wallet, you most likely have at least one credit card and one debit card. The simplicity and security they provide are hard to surpass, but there are some key distinctions that could have a significant impact on your wallet. Here’s how to figure out which one to utilize based on your spending requirements.

While the two types of cards appear to be identical and have similar basic functions, there are a few key difference between credit card and debit card. Here is a comparison chart of credit card and debit card:

Comparison Chart

MeaningA Credit Card is a plastic card that allows the customer to purchase goods and services on credit, up to the specified limit. Here, the card issuer makes payment on the customer’s behalf.Debit Card is a plastic card, through which the customer can spend money by drawing funds that are deposited in his/her bank account.
Issued byBanks and a few non-banks, and it can also be issued by various approved enterprises.Banks and are linked to the bank account.
Payment termsDeferredImmediate debit to customer’s account
ImpliesPay laterPay now
Credit PeriodGenerally, 45 days, and it is normally structured as revolving credit.No credit, instant debit
Account with the issuing bankNot necessaryNecessary, which is linked with the card
Access to deposit accountNo accessDirect Access to the concerned account, be it current or savings account
Credit scoreIt helps in creating good credit and improve credit scoreNo impact on the credit score
RewardsIt offers rewards, on the basis of spending like cashback, vouchers, reward points, etc. which are redeemable.No or Minimum rewards or incentives for spending.
Eligibility criteriaspecific eligibility criteria, which must be fulfilledNo eligibility criteria
Maximum Withdrawal LimitDetermined on the basis of credit score, existing debt, and credit history of the customer.Less than the balance lying on the credit of your savings or current account, to which the card is linked.
Source of moneyCredit extended by the card issuerConcerned bank account
SpendingSpend more than what you have toSpend only what you have
Who pays for the purchase?The credit card company pays to the vendor first on behalf of the card holder for the purchase and then the cardholder pays to the credit card company.The account holder pays for the purchase.
BillYou get a monthly credit statement or bill that reflects all the transactions that took place during the period.You do not get any bill or statement at the end of the month.
InterestInterest is charged on the outstanding balance when payment is not made to the bank within a specified time period.No interest is charged.
Penalty for defaultHighNot applicable

Final Thoughts

Even though credit card offers have a lot in common, they also have a lot of distinctions. As a result, it is recommended that you conduct a thorough study and choose between the two options based on your short- and long-term requirements.