While both fall in the category of payment cards, debit and credit cards are quite different from each other in terms of functionality. Both of these options allow you to carry out various transactions, but the source from which you get the funds sets them apart.
So, what is the difference between a credit card and a debit card? There isn’t just one, and here’s an overview of how these options differ to help you decide what works best for you.
Understanding Debit Cards
This card is linked to your savings account, meaning you utilise the savings in your bank account when you make a transaction using the card. Since these cards draw funds directly from your bank account, you are using your money to complete purchases.
Here are some pros:
- You don’t need to apply for this card separately
- You use the funds that are available in your account and avoid debt
- You benefit from the ease of withdrawing the funds easily without any charges
- You don’t need to pay any interest charge since you’re using your savings
- The associated fees and charges are lower as compared to credit cards
- You don’t pay any annual renewal fees on most debit cards
Understanding Credit Cards
With this card, you borrow funds from the credit card issuer. You get to spend only up to your credit limit, which the issuer grants on the basis of certain parameters. Every transaction you make gets added to your bill, which you receive at the end of every billing cycle.
Here are some pros:
- These cards offer instant access to funds to help during urgent financial needs
- You enjoy more rewards, cashback and discounts as compared to debit cards
- You can convert your expensive purchases into EMIs and avoid paying a lump sum for your purchases
- Timely repayment of your dues provides an opportunity to build a positive credit history
- You complete transactions by using funds from the assigned credit limit
What is The Difference Between a Credit Card And a Debit Card?
Check this table out to know how these cards differ from each other:
| Parameters | Debit Card | Credit Card |
| Source of Funds | In a debit card, funds are drawn directly from your savings through your bank account | In a credit card, you borrow funds from the financial institution or the credit card company |
| Repayment of funds | As these funds are drawn directly through your savings, you don’t need to make any repayment of the utilised funds | Since you borrow the funds, you need to repay the funds that you utilise at the end of the billing cycle |
| Spending Limits | Since these funds are deducted from your bank account, you can only spend the funds available in your bank account | You are allowed to spend up to the credit limit that the credit card issuer approved |
| Availability of the Cards | When you open an account with a bank, you get a debit card linked to your bank account without any charge | You generally have to apply for a credit card online or offline |
| Interest Charges | You don’t incur any interest charges since you’re using your existing savings | In a credit card, interest charges are applicable on the outstanding bill amount after the grace period ends |
| Fees and Charges | The fees and charges associated with a debit card are on the lower side as compared to a credit card, which include:Minimum balance maintenance chargesATM cash withdrawal feeForeign transaction chargesCard replacement fees | In a credit card, the associated fees and charges are generally on the higher side, such as:Joining feeAnnual renewal chargesInterest chargesLate bill payment feeOverdraft feesForeign transaction chargesATM cash withdrawal fee |
| Impact on Credit Score | Your credit score is not directly influenced since you’re not borrowing any funds | If you fail to repay the credit card bills on time, your credit score will go down and vice versa |
| Additional Benefits | Debit cards generally have fewer cashback offers, discounts and rewards than credit cards | The selling point of credit cards is that they come with various extra perks, such as cashback, discounts and rewards |
As you can see, credit cards come with various exciting perks, and using them smartly can help you save money with repeated usage. The One Credit Card is among the options that enable you to spend confidently as it is loaded with additional benefits. With this premium metal card, you can get discounts on shopping and dining, up to 5X rewards on top spends, easy EMI conversion of your expensive purchases, and more.
What’s more, this credit card is easy on your pockets as it comes with zero joining and annual renewal charges, as well as no charges for redeeming your accumulated reward points. Apply now to get started.
