Debit Card vs. Credit Card

debit card vs. credit card

It is hard to contemplate life without credit cards and debit cards. Gone are the days when cash was the way to go for transactions. We are in the digital age and our finances have no choice but to keep up.

Two of the most popular financial products we use today are credit cards and debit cards. While there are some similarities, they are not the same.

Let us dive into understanding these two products – features, differences, and more.

What are Debit Cards 

what are debit cardsDebit cards allow you to pay for purchases, both online and offline. The amount is debited directly from your account.

Here are some salient features and benefits of debit cards –

  • Getting a debit card is easy. All you need to have is a savings or a current account.
  • The amount is debited from your account so you can only utilize the existing funds in your account
    • The advantage of this is that you will not run into debt unnecessarily.
  • You can also use a debit card to withdraw money from an ATM.
  • There may be a limit imposed on the amount you can spend each day.
  • Certain debit cards come with joining as well as annual fee.
  • While it is not very common, some debit cards can also provide rewards and the option to convert your purchases to EMIs.

What are Credit Cards 

what are credit cards

Credit cards are an incredibly popular financial product that allow you to purchase products and services on credit. Currently, credit cards are only issued by banks.

Some salient features and advantages of credit cards are –

  • Credit cards give you the option to buy now and pay later. 
  • While the interest rate charged is high, you can avoid this if you pay within the due date.
  • Credit cards also come with a number of privileges such as Air Miles, cashbacks, Reward Points, etc. 
  • This product is a great way to build credit and increase your credit score.
  • While you can withdraw cash using credit cards, it comes with a hefty rate of interest.
  • If you are unable to pay your bill in full, you can pay just the minimum amount due and pay the rest through EMIs. However, an interest rate of 2.5% to 3.5% per month will be charged.

Differences Between Credit Cards and Debit Cards 

Here is a quick comparison between debit cards and credit cards –


Debit Cards

Credit Cards

Fund Source Your savings or current account Credit is extended by the card provider
Eligibility Anyone who has a savings or current account is eligible Depends on your age, income, etc.
Payment Amount is directly debited from your account To be paid before a certain due date
Interest No interest charged Hefty interest charged on the outstanding amount after the due date
EMI Available in some cases Available in almost all cases
Fees and Charges May come with annual fees and charges Comes with annual fees, late payment fees, joining fees, etc.
Rewards and Privileges Minimal  Offers attractive rewards and privileges such as Air Miles, Cashback, Reward Points, etc.
Spending Limit There is usually a daily spending limit  There is a daily and monthly spending limit as well as a credit limit
Security in case of Loss of Card Minimal Usually comes with zero liability insurance and is highly secure
Cash Withdrawal Cash withdrawals are generally free within a specified limit Cash withdrawals attract a heavy interest and fee

Which One Should You Choose?

debit cards vs. credit cards

The answer to whether you should choose credit cards or debit cards is dependent on one main factor – your financial requirements.

Are you looking to build your credit and are disciplined enough to pay bills on time? Then opt for a credit card. This way you can also take advantage of the ‘no interest period’ and build your credit score through timely repayments.

Another benefit of credit cards is that you get time to make delayed payments. The interest-free period for your credit card can range from 20 to 40 days which you can take advantage of.

Credit cards also come with rewards such as Air Miles, discounts on dining and movie tickets. 

However, if you just want to make your purchases without having to go to the bank or use cash, then just use your debit card. Additionally, you will not incur interest charges since the amount is debited from your savings account. This way you can avoid falling into a debt trap.

In Conclusion

Credit cards and debit cards are indispensable financial products. While most of us have debit cards, not everyone opts for credit cards despite its many advantages. Carefully go over your requirements and your financial habits to decide which product works best for you.

Do you have both these cards? Which one do you prefer? Let us know in the comments below.