You might be thinking that in the era of technology, everyone knows the actual definition of Debit Card and Credit Card. But it is not the reality. Many people around us are not familiar with debit and credit cards. Some of them think that these are the same thing, and others don’t know the difference between a Debit Card and Credit Card.
If you are one of those who don’t have enough knowledge about these cards, be relaxed. I will help you to clear your doubts. In this blog post, I will be simplifying the main differences between Debit Card and Credit Card.
On top of that, you will get to know everything about the debit card and credit card. Also, I will compare the debit card with the credit card so that you can choose the best one among both these cards.
Doesn’t matter that you are a student, a professional, or a normal reader. I can assure you that with the help of this basic to expert-level information, you will be well aware of the main differences between a debit card and a credit card. So, let’s get started.
What are ATM Card, Debit Card, and Credit Card?
As I said, we will start from scratch. With the Debit Card and Credit Card, ATM Card is the term that confuses people. They don’t know whether these are different or the same. So, let me tell you that ATM Card and Debit Card are only two different names for a card. There is no difference between the ATM Card and Debit Card. But, a Credit Card is different from both, which we will discuss further.
Now, probably, there is no confusion in your mind related to ATM Cards. So, for the rest of the article, I will use only the terms, Debit Card and Credit Card. Now, let’s get to know about these two cards.
A bank account linked card that has a rectangular shape, a magnetic strip, a chip, and a code of 16-digit numbers is called Debit Card. The bank in which you have an account provides you with a Debit Card. Mainly, Debit Cards are used to make digital transactions under your bank account.
Talking about the types of Debit Cards. Banks provide 5 types of Debit cards: RuPay Debit Card, Visa Debit Card, Mastercard Debit Card, Contactless Debit Card, and Maestro Debit Card. All these types of Debit Cards have different uses and different limits for transactions.
Notably, the Debit Card is a prepaid card, firstly, you must have funds in your bank account, and then you make transactions by Debit Card. Otherwise, you will not be able to make any transaction by using your Debit Card.
You can use a Debit Card to withdraw cash and check your account balance from an ATM. Moreover, you can use a Debit Card for making digital payments on offline stores and online stores. But remember, it is only another source of using your bank account funds like a cheque. Except for this, Debit Cards don’t avail you of any other services.
Looks exactly like a Debit Card and has the same rectangular shape, magnetic strip, chip, and 16-digit number code. But, it is not linked to any bank account. It belongs to a bank or financial institute. It also allows you to make digital transactions, but not use your funds.
Instead of using your money, you borrow money using a Credit Card. You borrow this money from the bank or institute where you got the Credit Card. And later, at the end of the month, you have to pay back the money with interest to the bank or institute.
Including withdrawing money from ATMs and making other digital payments, you can do all the things that you can do with a Debit Card. But, you are not able to check your account balance as your Credit Card is not linked with any bank account. Credit Cards have pre-sated limits on using funds.
Have you noticed the difference between Debit Card and Credit Card? Don’t worry if you didn’t. I will explain to you the main difference between Debit Card and Credit Card.
Main Difference Between Debit Card and Credit Card
The main difference between Debit Card and Credit Card is Debit Card belongs to a particular bank account and all the transaction is made from that bank account only. But, Credit Card belongs to a financial institution that lends you the money through the card.
The amount of money that you spent by using a Credit Card, you will be indebted for that amount money, and you have to pay it with interest. Along with this main difference, some more key differences are there like;
- While using the Debit Card, you spend the money that you own, but with the Credit Card, you spend the lent money.
- With a Debit Card you are not obliged to make any payment because you spend your own money on it, whereas, with a Credit Card, you have to pay the spent money every month.
- Most debit cards don’t offer cashback or rewards. But, credit cards usually give multiple types of rewards and cashback.
- Debit Card charges you a yearly service charge, but Credit Card charges you multiple other charges like penalties and joining fees.
- With a Debit Card, you can use money according to your bank balance. But, with a Credit Card, you can use the money to a certain limit.
- Using Credit Card can improve your credit score, but Debit Card doesn’t affect your credit score.
Debit Card VS Credit Card: Which One is Better?
Debit and Credit Card both have their advantages and disadvantages. Like Debit Card avails cheaper services and avoids you being indebted. But it doesn’t build your credit score, doesn’t give you any offers or rewards, and has less protection over unauthorized transactions.
On the other hand, using Credit Cards helps you to build your credit score, gives you rewards and cashback, and offers you more protection over unauthorized online and offline transactions. But, here you have to pay interest and penalties, and it can put you in debt.
So, instead of looking for which one is better, you should keep both cards and use both conveniently. In this order, while using a Debit Card, you should be aware of losing the card and be safe from sharing the pin. And while using a Credit Card, balance your account sheet timely and spend money according to your income.