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Difference between Debit and Credit Card

Understand the difference between debit card & credit card along with its features & benefits. Click here to know the advantages & disadvantages of both the cards and then decide which card to use, based on the differences.

August 30, 2019 / 09:23 AM IST

Remember the last time you stuffed a lot of cash in your wallet? With the advent of debit and credit cards, cashless transactions are raging. One swipe and you are all set to pay for your purchases. While operationally both the cards are same, functionally they are quite different. Let’s look at the difference between debit and credit cards. Understanding the difference between credit card and debit card helps you to decide which card you should get. In case you have both credit and debit cards, you can decide which card to use, based on the differences.

Conceptually, there is a difference between debit and credit.


Debit and credit difference

Debit means the removal of an amount from an account. In a book keeping entry, debits are indicated on the left-hand side. Credit refers to the amount received in an account. Credits are indicated on the right-hand side of a book keeping entry. It also means the ability of a customer to obtain goods or services without making an instant payment.


What is a debit card?

A debit card is issued by the bank where the individual has a savings account. Debit cards are also issued to corporate entity. Such cards are linked to the current account.

Debit card is a cash-transaction instrument which can be used to pay for goods and services. When you swipe your debit card, the cash is ‘debited’ from your account. The funds are then transferred to the beneficiary’s account.  A debit card can be used to make a host of transactions. You can pay your utility bills, shop online and offline and also transfer funds from your account to someone else’s account. When you need to withdraw money from your account, you can simply swipe your debit card at an ATM.


A debit card is a pocket sized plastic card. Earlier, cards with magnetic strips were issued. From January 2019, it is mandatory for banks to issue a chip-based debit card.  Debit cards with security chip inside them are called EMV cards. These cards are more secure and encrypted compared to their previous avatar. The following details are on the front of a debit card: a 16-digit unique card number, validity and expiration dates, and the logo of the creditor e.g. Visa, Mastercard, RuPay etc. The CVV, signature strip with card-holder’s signature, and customer services numbers are on the other side of the card.


What is a credit card?

Similar to a debit card, a credit card is a pocket sized plastic card. At present, banks and other financial institutions issue chip-based credit cards. The basic details of the credit card holder, credit card number and the expiry date appear in the front. The CVV, the signature strip for the credit card holder and details of customer care centers are on the reverse side.

The key difference between credit card and debit card is the modality of payment. When you use a credit card to make a payment, the amount is not deducted from your saving accounts. A credit card allows you to undertake a transaction on credit. The bank or the financial institution which has issued the credit card makes the immediate payment. The user of the credit card has to repay the credit amount to the bank at a later date. Failure to pay on time attracts penalty.

Each credit card has a pre-approved credit limit. It means that you can make multiple transactions within the approved limit. Credit cards are useful when you want to make a high value purchase but don’t have liquidity.


What is the difference between credit card and  debit card?

Issuer:  A debit card is linked to your savings or current account. It can be only issued by a bank where you have such an account. However, you can obtain a credit card from a bank without opening an account.

Source of funds: The primary difference between credit card and debit card is linked to the source of funds. Debit card transaction uses the funds available in your current or savings account for making transactions. The amount is debited from your account on a real-time basis.  When you use a credit card, the immediate payment is made by the card issuing company. The transaction made is similar to a loan given to the user. The credit card holder has to repay the amount to the credit card issuer at a later date.

Access to funds: A debit card only allows you access to the amount available in your current or savings account. If you have INR 10,000 in your account, you can only make payments up to INR 10,000. Credit card holders can access funds up to the pre-approved credit limit.  Usually, a high credit limit is offered to those with a high credit score or if the user has a corporate account with the bank.

Interest: In case of a debit card, the funds are debited on a real-time basis. No interest is payable. In contrast, delay in the payment of credit card amount attracts penal interest.

Repayment: Since you do not need to take money on credit on your debit card, there is no repayment required. However, credit card holder must repay the outstanding amount either through revolving credit i.e. paying the minimum due amount or paying more than the minimum due amount on the credit card, but less than the actual outstanding amount. The card-holder may also repay the entire outstanding amount by the due date.

Charges: To continue using your debit card, you have to pay an annual maintenance fee, along with a joining fee (depending upon the bank) and processing fee. While you must also pay the same fees to continue using your credit card, you may also incur late payment fees, prepayment penalty and foreclosure charges (in case of loans taken on credit card).

Monthly statements: No monthly statements are generated for a debit card. You can check all your debits through your account statement. A monthly statement or bill is provided for credit card. This is required since the transaction amount is provided on credit.

Fees: In case of a debit card, annual fees and PIN regeneration fees are applicable. In case of a credit card, a host of fees are payable. These include late payment fee, annual fees, and joining fees.

Privileges: Typically, debit cards do not come with any privileges. However, a credit card offers a number of them. Using a credit card, you can earn cash backs, air miles, and reward points.

Lost card liability: If you lose or misplace your debit card, the liability of the bank is minimal. However, a 100% liability protection is offered for credit cards. You have no liability for any unauthorised transactions.

Credit period: A debit card does not have any credit period. The funds available in the account are deducted instantly when a debit card is swiped. Credit cards have a credit period. The transaction amount is lent to the user on credit.

It is very easy to get confused between a credit and debit card. After all, they appear the same. Therefore, knowing the difference between credit card and debit card is important.  Understanding the difference between debit and credit cards helps you to make the right choice.



Are there any limits on the amount that can be withdrawn using a debit card?

RBI has imposed limits on the daily cash withdrawals. The limits depend on the type of debit card you hold. You can withdraw from Rs 15,000 to Rs 2 lakh or even higher.

My debit card has been issued by Bank K. Can I use the card to withdraw money from the ATM of Bank X?

Yes, this is permitted. Usually, the first five transactions made per month by using a debit card at another bank’s ATM are free. Withdrawals after the limit attract a transaction fee of Rs 20.

My pocket has been stolen and my debit card was in it. What should I do?

You should immediately report the loss to the bank. Call up the customer care number. Once you answer a few questions related to your identification, the debit card will be blocked. You also need to file an FIR at the nearest police station. A copy of the FIR needs to be submitted to the bank.

What are the documents required to apply for a credit card?

The requirements vary from bank to bank. Usually, the following documents are requested.

-Self-attested recent passport size photograph of the applicant

-Self-attested copy of a valid photo identity document (please refer to the list below for details)

-Self-attested copy of your residence address proof (please refer to the list below for details)

-Self-attested copy of the latest salary slip or income tax returns or Form 16

-Know Your Customer (K.Y.C.) Documents
Moneycontrol News
first published: Aug 30, 2019 09:23 am

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