Different between credit card and Debit card - Credit & Loan Options Different between credit card and Debit card - Credit & Loan Options

Different between credit card and Debit card

The different between the two is that:-

Credit card – the bank gives you certain amount of money as a “loan” to use over a specific period of time and you are obliged to be paying back the money every month with some interest. Sometimes you only pay the amount of credit you have used plus interest on monthly basis.

The amount to pay depend on the interest charged and the amount you have spent.

On the other hand, debit card is your money, this is the money you have in your account –  the only different os that the money is not liquid cash rather it is in your account, you use your debit card to purchase and swipe and withdraw cash, then the bank deducts the amount  you have spent plus service fee from your account.

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

Definition Debit Card Credit Card
Definition Money is deducted straight from your account Used to pay for good and services – borrowed money
Source of cash From your bank account-saving or cheque Advanced loan or short term loan given to you to use and pay back
Spending ration you can only spend what is available in your account You can spend more than you have – overdraft
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 No payment since its your money Payment is every month used amount plus interest
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 unauthorised transactions made.


 Debit Cards Vs Credit Cards

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.


  • 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.


  • 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.


So, Which One is Better?

As you can see, credit cards and debit cards come with their own advantages and disadvantages.

However, here are some of the instances where you can choose to use a credit card, or a debit based on their pros and cons.

    • If you have spending issues: Debit card

It goes without saying that if you can’t control how much you spend, to use a debit card. Since the money is going from your savings or current account, you are less likely to overspend and get into credit card debt.

    • Withdraw cash: Debit card

When you withdraw money using your debit card, you are gaining access to your own money, so there is no expense involved. However, if you use your credit card to withdraw money, you are withdrawing the money you don’t have. The bank will consider this as a type of loan which you will have to pay back with a high rate of interest.

    • Shopping or making transactions online: Credit card

Credit cards are your safest option while shopping online. If you detect fraud, you can always call your bank and block your card. Moreover, getting an amount reversed to your credit card is far easier than with a debit card.

    • To make a big-ticket purchase: Credit card

Credit cards offer you the convenience of being able to split transactions into EMIs . This makes it a good option to make big-ticket purchases since they become more affordable.

    • For a vacation: Credit card

Most credit cards are universally accepted. So, you can use a credit card when you are overseas and not have to worry about having foreign currency in hand. Do, however, keep in mind that when you swipe your card overseas, you will be charged a foreign currency mark-up fee.