What is The Difference Between a Credit Card And a Debit Card

What is the difference between a credit card and a debit card
What is the difference between a credit card and a debit card

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:

ParametersDebit CardCredit Card
Source of FundsIn a debit card, funds are drawn directly from your savings through your bank accountIn a credit card, you borrow funds from the financial institution or the credit card company 
Repayment of fundsAs these funds are drawn directly  through your savings, you don’t need to make any repayment of the utilised fundsSince you borrow the funds, you need to repay the funds that you utilise at the end of the billing cycle
Spending LimitsSince these funds are deducted from your bank account, you can only spend the funds available in your bank accountYou are allowed to spend up to the credit limit that the credit card issuer approved
Availability of the CardsWhen you open an account with a bank, you get a debit card linked to your bank account without any chargeYou generally have to apply for a credit card online or offline 
Interest ChargesYou don’t incur any interest charges since you’re using your existing savingsIn a credit card, interest charges are applicable on the outstanding bill amount after the grace period ends
Fees and ChargesThe 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 feesIn 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 ScoreYour credit score is not directly  influenced since you’re not borrowing any fundsIf you fail to repay the credit card bills on time, your credit score will go down and vice versa
Additional BenefitsDebit cards generally have fewer cashback offers, discounts and rewards than credit cardsThe 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.