Confused between debit cards and credit cards? The best way to choose between the two is to understand the characteristics that set them apart. One key difference between a credit card and a debit card is that the latter gives you access to money in your bank account and the former helps you get instant access to borrowed funds.
In addition to this, these cards differ in several other ways, such as fees, interest, and offers. Knowing these differences allows you to choose the right debit or credit card offers and strengthen your finances.
Read on for a detailed look into the differences between credit cards and debit cards.
What is a Debit Card?
You generally get a debit card when you open an account with a bank. You can choose from several account options and get a debit card linked to it. This card allows you to access the funds in your account while transacting online or offline.
The amount is directly deducted from your account balance whenever you make a purchase. You don’t have any obligation to replenish the balance. However, you may need to maintain a minimum balance in the account depending on the bank and the type of account you open.
What is a Credit Card?
You can apply for a credit card without having an account with the issuer. You can choose from several options based on your spending needs and lifestyle. As mentioned, a key difference between a credit card and a debit card is that you borrow funds when using a credit card.
This borrowed amount is called your credit limit. Whenever you make a payment, your limit is reduced accordingly. Upon repaying the utilised amount, your limit is replenished. This is why a credit card is called a form of revolving credit. For instance, if you have a credit limit of ₹90,000, utilise ₹20,000 and repay only ₹15,000, your available limit will be ₹85,000.
Credit Card vs Debit Card: Key Points
Here are some important points of difference between a credit card and a debit card:
| Points of Difference | Debit Card | Credit Card |
| Annual charges | These may come with annual maintenance charges but no other fees. | Issuers generally levy annual and joining fees, which can be waived off in certain circumstances. You can also get lifetime-free credit cards at zero annual and joining charges. |
| Interest | No interest is levied as you do not need to repay the amount used. | The issuer levies an interest on any outstanding bill amount if you do not repay by the due date as per the policy. |
| Usage limit | The amount of money you can use depends on the balance in your account. | The amount you can spend depends on your available credit limit, which depends on your income and other eligibility factors as per the issuer. |
| Benefits and rewards | You can get reward points, cashback and discounts on certain transactions depending on the card. | Generally, a credit card offers rewards and benefits on most transactions. These are usually more than what debit cards offer. |
| Eligibility | You don’t have to meet specific eligibility criteria to get a debit card. It is generally offered with the account you open. | You need to meet the specific criteria set by the issuer you choose. Generally, you need to have a good credit score and stable income. |
| Cash withdrawals | You can withdraw as much cash as is available in your account. However, there may be a transaction limit, depending on your bank. | Unlike other payments, you can withdraw only up to a certain percentage of your limit, which usually attracts interest from day one. |
| Repayment liability | There is no repayment liability involved with debit cards as you are using the money in your account. | You have to repay the utilised limit before the due date. Non-repayment can lead to interest charges and a negative impact on credit score. |
| Choice | You may get a few options based on your profile and account balance. | In the financial marketplace, you can choose from various credit cards, from premium to beginner-friendly. |
| Credit Score | Your debit card transactions have no bearing on your credit score. | Credit card transactions help you build a credit history. Paying your bills on time helps you boost your score. |
How to Choose Between Debit and Credit Cards
While the above points of difference between credit cards and debit cards can help you make the right decision, here are some additional pointers:
- There are many credit card offers that help you maximise your savings in comparison to debit cards
- If you want to build your credit score, getting a credit card can help
- Credit cards can be more effective in spending overseas
- Credit cards allow you enjoy the EMI conversion facility, though some debit cards also offer the same in partnership with brands
- Opt for debit cards if you are worried about overspending
- Go for a credit card if you want to learn how to responsible in managing your finances; just remember to opt for a lower credit limit
- A debit card is better if you want to withdraw cash as cash advance via a credit card involves additional charges
Usually, both debit and credit cards are a must-have in your wallet. When it comes to credit cards, choose one with a range of benefits that suit your needs and keep fees to the minimum.
That’s exactly what you get with the One Credit Card, which comes with zero annual and joining fees, offers 5X reward points for top two spends categories, and has 80+ offers* on categories from travel to dining. What’s more, you can use the full-stack One Credit Card App to set your budget, spend confidently, plan travel and lots more. Apply online today to enjoy all these benefits and more!
*Offers may vary with time. Please check your One Credit Card app for the latest information.
