So far, banks had offered several facilities to draw cash at any time with ease. Two of those facilities are Credit card and Debit card, which helps us to draw cash at any time and fulfill our money requirements. Now we are going to discuss the difference between Credit card and Debit card.
Content: Credit Card Vs Debit Card
|Basis for comparison||Credit Card||Debit Card|
|Meaning||Credit card is issued by a bank or any financial institution to allow the holder of the card to purchase goods and services on credit. The payment is made by the bank on the customer's behalf.||Debit card is issued by a bank to allow its customers to purchase goods and services, whose payment is made directly through the customer's account linked to the card.|
|Bank Account||The bank account is not prerequisite for issuing a credit card.||The bank account is a must for issuing a debit card.|
|Limit||The maximum limit of withdrawing money is determined according to the credit rating of the holder.||The maximum limit of withdrawing money will be less than the money lying in the saving bank account.|
|Bill||The holder of the card has to pay the credit card bill within 30 days of every month.||There is no such bill, the amount is directly deducted from the customer's account.|
|Interest||Interest is charged when payment is not made to the bank within a specified time period.||No interest is charged.|
Definition of Credit Card
A credit card is a type of facility which allows its customers to purchase goods and services on credit, and the payment is made by a third party (financial institution) on his behalf immediately. The customer has to pay the credit amount to the third party at a later date. In this regard, every month, the financial institution sends a bill to the card user for the amount paid on his behalf. Usually the user is allowed a credit period of 30 days within which he can pay the amount, afterwards, interest is charged at a prescribed rate.
Definition of Debit Card
A debit card is a type of facility provided by the banks to its customers to purchase goods and services against his own saving bank account. So, whenever the transaction takes place, the amount is deducted from the customer’s account. Here, the bank charges a nominal amount every month for the use of the card. It can be used for purchasing goods, transfer of funds, internet banking services, deposits, etc. Nowadays, ATM cum debit card is also available in the market which allows you to avail all the facilities of the ATM card.
Similarly like a credit card, it is also made up of plastic with a magnetic strip which contains all the basic account details of the customer.
Key Differences Between Credit Card and Debit Card
- For issuing the Credit card, the bank account is not the requirement of the bank, but in the case of Debit card the customer must have a bank account.
- The major difference between Credit Card and Debit Card is that, in Debit card the amount is withdrawn from the bank account linked to it, while in the Credit card the amount is not withdrawn from the account.
- In Credit card the bank charges interest, whereas in the Debit card no interest is charged.
- The maximum limit of withdrawal in Credit card depends on the credit rating while the maximum limit of withdrawal in Debit card depends on the cash balance in the account.
- The rate of overdraft facility is low on the Credit card, but the rate of overdraft facility is high in case of a Debit card.
- Made up of plastic with a magnetic strip.
- Issued by a bank or financial institution.
- Provides basic facilities like withdrawals, transfer of funds and online payment.
- Charges are levied for the use of a card.
It is not easy for us to carry a huge amount of cash or a chequebook every time with us, so credit card and debit card are good facilities that helps to overcome such a problem. If you have enough cash balance in your bank account, then you can choose the debit card, but if you don’t have a bank account and your credit ratings are quite good, then you can choose the credit card. It’s up to you, decide yourself? Which card suits you more, according to your requirements.