Debit Card Vs. Credit Card: All You Need To Know

Debit Card Vs. Credit Card: All You Need To Know

Debit and credit cards are common payment methods that allow for easy online and offline transactions. Even though they may look similar and have some similar functions, they are quite different from each other. If you are wondering what is the difference between a credit card and a debit card, you are at the right place.

Fundamental Difference

• The main point of difference in these cards is the source of funds.

• With a debit card, you use the funds that are already in your bank account.

• With a credit card, you borrow money from a credit card company up to a specific credit limit.

• The bank provides you with a debit card when you open a bank account.

• On the contrary, you apply for a credit card online or offline from an issuer you may or may not have an account with.

Perks of Credit Card Usage

Here are some benefits of a credit card:

Access to Credit

Credit cards provide funds quickly and easily to meet your needs and allow you to repay the amount later. You can use the funds for:

• Utility bill repayments
• Purchasing groceries, gadgets and more
• Paying the school/college fees of your children
• Making online and offline store purchases

Additional Perks

The selling point of credit cards is the extra benefits that they offer, like:

• Cashback on purchases
• Discounts and deals
• Waiver of fuel surcharge
• Welcome or joining benefits
• Reward points on transactions
• Complimentary insurance
• Discounted flights, stays and free airport lounge access
• Special limited-time and festive offers

Helps Build a Credit History

You also get the chance to build a positive credit history and a high score. Consistent repayments towards your credit card bills are recorded with credit bureaus that generate your credit reports, such as:

• Experian
• Equifax
• TransUnion CIBIL
• CRIF High Mark

Cons of Credit Card Usage

A credit card comes with these limitations:

Fees and Charges

Unlike a debit card, a credit card requires you to pay associated charges annually and for the use of certain facilities. These charges include:

• Joining fees
• Late payment fees
• Annual renewal fees
• Over-limit fees
• ATM cash withdrawal charges
• Foreign transaction fees

Non-Repayment Affects Credit Score

Not repaying your dues on time can harm your credit score. This can lead to rejections of your future credit applications. To avoid missing out on your bill payments, you can:

• Set monthly bill payment reminders
• Set up an auto-debit facility

Risk of Debt Trap

You incur interest on your unpaid credit card bills. Non-payment or part-payment can lead to the piling up of interest, and this can make repayment stressful. If not planned properly, this financial burden can result in you falling into a debt trap.

Pros of Using a Debit Card

Check out the advantages of using a debit card:

No Risk of Debt Trap

You do not have any risk of falling into a debt trap since you use your existing account balance. This way, you can make transactions according to your budget. 

No Interest and Annual Fees

You do not pay any yearly renewal fee for debit cards. What’s more, you do not incur any interest since you do not borrow any funds.

Cons of Using a Debit Card

Here are some limitations of a debit card:

No Additional Perks

Compared to credit cards, debit cards come with fewer benefits, meaning you may be missing out on:

• Discounts on purchases
• Cashback on various transactions
• Reward points on transactions

No Opportunity to Build Credit Score

Debit card usage has no impact on your credit history since you are using money from your account. 

Associated Fees and Charges

Even though you do not need to pay annual renewal charges, there are some associated charges. These include:

• ATM cash withdrawal charges
• Minimum balance charges
• Overdraft fees
• Charges for certain transactions
• Foreign transaction fees

Knowing the difference between a credit card and a debit card can support you in your decision to get both and even prioritise which card to use. Have a debit card already and want to get a rewarding credit card? Look no further than the premium metal One Credit Card. 

Apart from allowing you to convert large bills into budget-friendly EMIs, this card offers numerous other benefits. You get up to 5X rewards on the top spending categories, discounts on shopping, dining and more, no joining fees, no annual renewal fee and no charges for redeeming your reward points. Apply now to get this credit card online today!