Debit Card vs Credit Card – What’s the difference?
Debit cards and credit cards are commonly used terms and it is easy to think that they are the same. However, both are very different from each other and it is important to know the differences between a debit card vs credit card.
Debit cards are always linked to a bank account. When you make a purchase using a debit card, money is immediately deducted from your bank account. If you don’t have sufficient balance in your bank account, the debit card transaction will fail. In this way, a debit card is a key to access the money in your bank account. Most debit cards in India are actually Debit cum ATM card so they allow you to withdraw cash form the ATM also.
A credit card is not linked to your bank account. When you make a purchase, money is deducted from the line of credit (called credit limit) given to you by the card issuing bank. You don’t pay with your own money, rather the bank pays on your behalf.
At the time of issuing you a credit card, the bank checks your income levels and determines your creditworthiness i.e. your ability to pay back the money. You can use your credit card on anything as long as your total spend is below your credit limit. At the end of each month, the bank generates a bill for all your credit card expenses and you need to pay this bill to the bank. As long as you pay on time, you dont need to pay anything extra to the bank. Thus credit cards let you use the banks money for upto 45 days without paying any interest.
|Debit Card||Credit Card|
|Linked to your bank account||Not linked to bank account|
|All your money is at risk if your debit card is hacked||Your money is safe. You can dispute any fraud transactions and avoid paying for them|
|No effect on CIBIL score||Improves your CIBIL score if you pay on time|
|Have to pay as soon as you make a purchase||Purchase first, and pay after 45 days|
You will need to wait 2-3 weeks for your credit card after you submit the application. Banks will first dispatch the physical card and then the PIN will be sent separately. In some cases, you will need to activate the card at the nearest ATM of your card issuing Bank.
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