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On the surface, credit and debit cards may seem similar to you, with both having 16-digit numbers, EMV chips, and expiry dates. While both make it easy and convenient to shop, there are certain differences between credit cards and debit cards.
As India’s credit card penetration increases, many people possess both of these cards. At times, it becomes difficult to decide which card to use for your specific needs. By understanding how they differ, you can make a smarter decision.
An Overview of Credit Cards Vs Debit Cards
Apart from a few similarities, there are many differences between credit cards and debit cards:
| Basis | Credit Card | Debit Card |
| Usage | You can borrow money from the bank to cover the cost of purchases | You can use the money in your bank account to make purchases |
| Source of Funds | The money for the transaction is deducted from the credit limit extended by the issuer | The money is spent from your current or savings bank account |
| Bank Account Requirement | You don’t need a bank account to use a credit card | Banks offer debit cards when you open a current or savings account |
| Eligibility Criteria | You need to qualify as per the eligibility criteria for age, income, and employment to get a credit card | You need to have a bank account to get a debit card |
| Interest Charges | Since it is a credit facility, it comes with an interest rate or annual percentage rate (APR) that applies only when you do not repay by the due date | These cards don’t have any interest rates |
| Fees | You may have to pay certain charges, like annual fees, late fees, advance fees, and more | You may have to pay certain charges, like annual fees or overdraft charges |
| Credit Building | Helps you build a strong credit score if you use this card responsibly | The use of this card doesn’t impact your credit score |
| Security | Extends insurance cover in case of theft or loss of card | Provides minimal security in case of theft and loss |
| Types of Cards | There are many types of credit cards you can choose from | You have a few different options available |
| Spending Limit | The issuer extends you a credit limit based on your creditworthiness | You can spend as much as you have in your bank account |
| Added Charges | Credit cards may have joining fees, annual fees, cash withdrawal charges, fees on foreign transactions, and more | There are usually no hidden charges |
What to Consider When Choosing Between Credit Card and Debit Card
You need to take into account these aspects of comparison when between these two types of cards:
Financial Discipline
- You must consider your spending habits and financial discipline when choosing between these two cards.
- If you can manage credit responsibly, go ahead with a credit card.
- If you are likely to overspend, a debit card can be an ideal choice.
Credit Goals
- Debit cards cannot help you build a credit score, so you can get credit card to help you do so.
- Improving your credit score can be fruitful, especially if you wish to purchase an asset, like a car or home.
Rewards and Perks
- Credit cards offer various benefits, including cashback, travel rewards, exclusive discounts, and more.
- Opting for a credit card can be prudent if you can leverage these benefits to save more.
Emergency Corpus
- A credit card can help you access short-term credit to cover unforeseen expenses.
- However, relying solely on credit cards for emergency requirements can lead to debt accumulation.
- If you wish to build an emergency corpus, you can keep your savings in a bank account and have access to these funds via a debit card.
Fraud Protection
- There is a difference between credit cards and debit cards when it comes to security.
- Credit card companies can reverse transactions in case of fraud, but this is not as easy when you use a debit card, as the funds are debited from your account immediately.
- Some credit cards come with insurance coverage too.
Now that you know the difference between credit card and debit card, you can decide on which one to get. If you already have a debit card and want to increase your purchasing power, get the One Credit Card. This premium metal credit card allows you to earn 5X rewards, convert big bills into EMIs and get fuel surcharge waivers and dining discounts.
It is also backed by a powerful app that makes it easy for you to spend confidently, set limits and stick to a budget. It also helps you redeem your points with ease, plan international vacations and much more. Apply now to enjoy all its benefits.
