Are you wondering what are the differences between credit cards and debit cards? You can use these financial tools to make online and offline purchases. However, a debit card is linked with a savings or salaried account where you utilise your funds when you make payments, while in the case of a credit card, the issuer lends you credit to make payments.
Apart from this, several other aspects differentiate a credit card from a debit card. Knowing about them will enable you to apply for the right card confidently.
Differences Between Credit Cards and Debit Cards
Apart from their basic functionality of providing funds, there are several key differences between the two:
| Debit Cards | Credit Cards |
| In the case of a debit card, after a purchase, the amount is deducted instantly from your account. Issuers charge a maintenance fee for issuing such cards. It is linked to your savings/salaried account. Since there’s no borrowing of credit from the issuer, there’s no interest charged. Cash withdrawal using a debit card doesn’t attract a fee, especially if you’re withdrawing from the issuing bank’s ATM Does not help build creditworthiness and transactions are not recorded in your credit report | In a credit card, the amount swiped is deducted from the credit limit; the issuer determines this limit Issuers usually charge annual and joining fees, but a lifetime free card does not include such charges It is linked to the issuing bank, which provides you credit facility Since there’s borrowing of credit from the issuer, you have to pay interest charges if payments are not made on timeCash withdrawal using a credit card has high interest charges, and these charges vary from bank to bank Can increase or decrease your creditworthiness based on your usage, payment of bills, etc. |
Other significant factors to consider are eligibility and security. Both the cards offer safety features such as OTPs, PINs and SMS alerts.
The eligibility criteria for getting a debit card are fairly simple, you just need a savings or current account with the issuing bank. In contrast, applying for a credit card involves stricter eligibility requirements, such as:
- You should be above 18 years of age
- You should have a stable income
- You should have a good credit score
The process of getting a credit card is more complex than a debit card.
Comparing The Pros and Cons
Both the cards have advantages and disadvantages; for example, using a debit card needs less supervision over transactions as it doesn’t have any interest charges. However, in case of a credit card, missing a bill payment attracts various charges like late payments and interest rates. This can affect the credit score over time.
Emergency Funds: A debit card gives access only to the money in your account, whereas a credit card allows you to access funds up to your credit limit. You can pay the amount in EMIs according to your convenience.
Debt Accumulation: Using a credit card comes with more responsibility. Apart from tracking your expenses, you must try to make timely payments of your bills. Upon multiple defaults, repaying the amount with additional charges and interest rates becomes difficult. This can lead to debt accumulation in future.
Rewards and Perks: This is the most rewarding feature of using a credit card. You can earn reward points and cashback for making purchases. Ensure to select the right one after assessing your spending habits. Most debit cards don’t have such a provision.
Credit Score: While using a debit card, you can keep track of your expenses and maintain sound financial health. However, it doesn’t contribute much to building your credit history. In the case of credit cards, you can build your credit history by making full payments before or on the due date. This can help you get a loan with better rates in the future.
Added Benefits: Most credit cards today offer complimentary membership to clubs, lounge access, travel insurance and more. These perks enhance your shopping experience, whereas a debit card usually doesn’t provide such benefits.
Considering all these factors, you can select a card according to your financial needs and requirements. That said, the One Credit Card allows you to earn 5X reward points on your top two spending categories each month. Using its full-stack mobile application, you can convert large payments into EMIs and enjoy financial flexibility.
The One Credit Card app also allows you to set spending limits to stay within budget and use your card confidently. It also offers a range of deals on rent payments, entertainment, electronic purchases and more. Apply now to enjoy all these benefits!