Difference Between Credit Card and Debit Card

What Is a Debit Card?

A debit card is a payment card that makes payments by deducting money directly from a consumer’s checking account, rather than on a loan from a bank. Debit cards offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors such as Visa or Mastercard.

There are two types of debit cards that do not require the customer to have a checking or savings account, as well as one standard type.

Types of Debit Cards

There are various types of debit cards in India. Let’s have a look at each of these:

Visa Debit Card

It has a worldwide presence and is widely used in more than 200 countries across the globe. During the transaction, the money is debited from your Savings Account linked to this card in real-time. Visa card’s additional layers of security, such as Verified by Visa ensure your transaction is safe & secure. With this card, you can shop on both Indian and international shopping sites, pay your utility bills like telephone, water, electricity, gas, etc.

MasterCard

Debit Card With this card, you can enjoy the benefit of accessing your cash across the world. MasterCard users can enjoy 24 hrs uninterrupted banking services, which can be used during emergencies like loss or theft of the card. Needless to say, you can make online transactions for shopping, travel, booking tickets, and at the same time withdraw money from ATM centers. Maestro Debit Cards Maestro is recognized at over 1.5 crore POS (Point of Sale). This means you can make secure online transactions in India as well as international websites. You also get additional security with MasterCard SecureCode’s 2-Factor authentication feature on your Maestro debit.

EMV cards

EMV is an acronym for Europay, MasterCard, Visa, and are the latest chip-based technology global standard cards across the globe for making card payments. All banks are replacing ordinary debit cards with EMV chips as it provides enhanced security features. They help to stop malpractices like card cloning and card skimming. The old debit cards have a magnetic stripe that may store all your data. So fraudsters can easily copy your data and create a Fake card. But in an EMV chip debit card, your data is stored only on the microprocessor chip found. This means that every time you swipe your card, the card generates fresh user data, which makes it impossible for fraudsters to copy your previous data.

Platinum Debit

Card These cards have higher cash withdrawal limits and higher transaction limits. Platinum debit cards are generally meant for customers who are interested in having high cash withdrawals, although there is a limit to the transactions. Any platinum debit card will cost Rs 200+ST, whereas regular debit cards are charged Rs 100+ ST. But, they also have good loyalty points to offer. So if you are a frequent debit card user who wants to enjoy good rewards, this card can be a good option for you.

What Is a Credit Card?

A credit card is a card issued by a financial institution, typically a bank, and it enables the cardholder to borrow funds from that institution. Cardholders agree to pay the money back with interest, according to the institution’s terms. Credit cards are issued in the following variety of categories:

Standard cards simply extend a line of credit to their users for making purchases, balance transfers, and/or cash advances and often have no annual fee.
Premium cards offer perks such as concierge services, airport lounge access, special event access, and more, but they usually have higher annual fees.
Rewards cards offer cash back, travel points, or other benefits to customers based on how they spend.
Balance transfer cards have low introductory interest rates and fees on balance transfers from another credit card.
Secured credit cards require an initial cash deposit that is held by the issuer as collateral.
Charge cards have no preset spending limit but often don’t allow unpaid balances to carry over from month to month.

Types of Credit Cards in India

Credit cards’ growing popularity has led to disrupting the space of lending and credits. Many new cards enter the market frequently with a whole new range of features and benefits.
These features and benefits go a long way in categorizing the cards into different types. Individuals choose a card based on these categories. There are basic cards that a beginner prefers and there are air miles cards that can get you free flights. Here is a list of types of credit cards based on various criteria:

Basic Credit Cards: This credit card will be the preferred choice for those who wish to try out using a credit card. You will be given a small credit limit based on your income and you can make purchases with the given limit. There are no additional benefits given on transacting with the card.
Secured Credit Cards: Individuals who have a poor credit history can get hold of a secured credit card by making a deposit equal to the credit limit of the card. This deposit acts as a security to issue credit card for banks. If you make payments on time consecutively for a few months, the bank may return the security deposit.
No Annual Fee Credit Cards: A no annual fee credit card is one that does not levy an annual fee for the usage of the credit card. It can be considered as a basic credit or slightly above that level that provides very few benefits. Individuals at the entry-level of credit card usage or those who make limited use of the card would prefer a no annual fee credit card.
Low-Interest Credit Cards: Credit cards that offer a lower interest rate as compared to the other cards from a similar category is known as low-interest credit card. However, this category is different from the balance transfer cards as the interest rate will not be as low as 0% and the rates are not valid for a specified time as in the latter case.
Balance Transfer Credit Cards: Though most credit cards offer the facility to transfer balance, a balance transfer credit card comes with a low-interest rate for a specified period of time. If your current card has a high-interest rate, you may transfer the outstanding balance on your current card to a balance transfer card with a low rate. Some cards offer an opening rate as low as 0%.
Rewards Credit Cards: A rewards credit card is one that offers some kind of rewards for every rupee you spend with the card. Every bank defines the number of reward points you get for a specified type of transaction, such as grocery shopping and online bill payment, you make with each rewards card it offers.
Cashback Credit Cards: Cashback credit cards offer a certain percentage of the purchase amount as cashback whenever you make a transaction with the card. The bank may also mention criteria such as cashback is applicable only for petrol transactions.
Travel Credit Cards: Frequent travelers benefit from a travel credit card as the card offers benefits such as travel insurance, global acceptance, favorable currency conversion rates, and more.
Shopping Credit Cards: Credit cards that come with deals and offers when the card is used to pay for shopping expenses. Online and offline shopping can get you additional rewards for every purchase.
Entertainment Credit Cards: Credit cards that provide discounts and offers on entertainment-related spending are known as entertainment credit cards. Such spending includes movie ticket purchase, concert ticket purchase, amusement park ticket purchase, and other events.
Airmiles Credit Cards: Every rupee you spend with an air miles card will offer air mile points to your card account. Upon accumulating the air mile points, you can redeem them for free flight tickets or other goodies available on the redemption catalog.
Lifestyle Credit Cards: This type of credit card gives benefits when the card is swiped for lifestyle expenses such as premiere screenings, nightlife, fashion shows, and more.
Premium Credit Cards: Premium credit cards are dedicated to a selected few. It provides free access to golf clubs, airport lounges, concierge service, and insurance. It may also come with complimentary travel and hotel accommodation coupons. Some cards also offer a personal relationship manager to handle the assets of the cardholder. Not everyone can get approval to own this card.
Co-Branded Credit Cards: Banks tie up with brands to bring out co-branded cards that provide special discounts and deals when you make a transaction associated with the brand. Though you can make other transactions, they wouldn’t be very profitable. This strategy is, generally, used to increase the customer base for the brand.
Student Credit Cards: The primary users of this category of cards are college students. The card considers the fact that students do not, often, have a credit history. The approval for a student credit card has fewer criteria to be satisfied as compared to the other full-fledged cards. It also comes with a lower interest rate.
Business Credit Cards: These cards are designed specifically for business use. This is to make sure that business and personal expenditures are maintained separately. However, even a business credit card requires you to have a good credit history to be eligible. This is because the card issuer considers the applicant to be accountable for bill repayment.
Prepaid Cards: Prepaid cards require you to load money before they can be used. For every transaction you make with the card, funds are fetched from the card balance. There is no finance charge or minimum payment criterion applicable to this card.

Debit Cards Vs. Credit Cards: A Comparison Between the Two

Let’s take a closer look at the differences between credit cards and debit cards.

Parameters	Debit Card	Credit Card
Definition	Deducts money directly from your savings bank account or your current account.	Allows you to borrow funds to pay for goods and services.
Source of funds	Your savings bank account or current account.	Credit extended to you by your card issuer. It gives you access to money you otherwise do not have (like a very short-term loan).
Spending advantage	You can only spend how much you have.	Can spend more than what you have.
Who pays for the purchase?	You pay for your purchase.	The credit card company pays the vendor for your purchase. You pay the credit card company.
Bill	There is no bill or statement	You get a bill or statement each month with details of the transactions you have made.
Payment	There is no payment that needs to be made since you are using your own money.	A bill needs to be paid each month since it is being borrowed.
Fees and charges	Annual fees and PIN regeneration fees are applicable.	Credit cards have multiple fees applicable. These include joining fees, annual fees, late payment fees, and bounced cheque fees among others.
Interest	There is no interest that is charged.	Interest is charged on the outstanding amount if it hasn’t been paid by the due date.
Limit to funds that can be accessed	You can access any amount up to what is currently available in your savings bank or current account.	You can use the card only up to the pre-set credit limit on your card.
Rewards	Typically, the rewards you get are minimal	Get to enjoy cashback, air miles, and reward points which can be redeemed.
Privileges	Doesn’t come with many privileges.	Come with numerous dining, retail, entertainment, and travel privileges (depending on the type of card you have).
Lost card liability	Protection from theft or loss of the card is minimal.	Most cards offer 100% lost liability protection. So, you are not liable for any unauthorized transactions made.

Debit Cards

Pros

There is no debt involved since you are using your own money.
It is cheaper to use since there are no interest charges involved.
Serves as an ATM card as well, so you can use it to withdraw money from an ATM.
Approval for a debit card is easier and faster.
Doesn’t help build a credit history.

Cons

You don’t have the ability to leave disposable cash in your account since money is directly debited.
It can complicate balancing your passbook at the end of the month if you don’t keep track of your spending.
You may be charged a fee if you withdraw money from a different bank ATM.
There is very little protection when it comes to debit card fraud.

Credit Cards

Pros

Credit cards are extremely convenient and prevent you from having to carry cash with you.
Credit cards help you build your credit score.
The rewards you earn are much higher than those on debit cards.
They provide you with flexibility when it comes to spending since they come with relatively high credit limits.

Cons

If you don’t pay your bills on time or in full, you are charged a high rate of interest.
Credit cards have multiple fees.
Missing a payment (even due to genuine reasons) could end up adversely affecting your credit score. You then must work much harder to build it.
While there is a credit limit, you could always be tempted to spend more than what you have. This leads to debt.