Credit Card vs Debit Card: What's the Difference

Synopsis

• Debit Cards and Credit Cards are both convenient payment methods for digital transactions.

• A Debit Card is directly linked to your bank account, whether it’s a Salary, Savings, or Current Account, allowing you to spend only the available balance in your account.

• On the other hand, a Credit Card offers the flexibility of buying now and paying later, providing you with a credit limit to make purchases and repay the amount over time.
  
  

Debit Cards and Credit Cards are payment cards that facilitate digital payments.

Debit Cards are directly linked to your bank account (such as a Salary, Savings or Current Accounts).

Credit Cards give you the benefit of buying now, paying later.

Debit Cards and Credit Cards are payment cards that facilitate digital payments, both online and offline. Although they serve similar purposes, the way the operate differs greatly. A Debit Card is associated with your bank account and allows you to access your account funds by way of merchant payments and cash withdrawals. With Credit Card, the card-issuing company or bank provides you with a certain credit limit based on your income and credit history. Credit Card is a form of unsecured debt – you can utilise a portion of the credit limit whenever required and pay it back at the stipulated time. Essentially, when you use a Debit Card, the equivalent funds are deducted from your account outright and you don’t have to pay bills later, latter being the case with Credit Cards.

Still confused between a Credit Card or Debit Card? Wondering which one you should use when?

Our guide will help clear your doubts.

The basic difference between Credit Card and Debit Card

You can use both Credit Card and Debit Cards to pay for your purchases online or offline. The key difference between the two is what happens after you swipe your card.

Debit Cards are directly linked to your bank account (such as a Salary, Savings or Current Accounts). When you use your Debit Card, the amount is deducted directly from your bank account.

Credit Cards give you the benefit of buying now, paying later. When you use your Credit Card, your bank extends you credit for a certain period. You must pay the bank for your purchase within a specified date (also called the due date).  Apart from this, there are plenty of additional benefits depending on the Credit Card you opt for.

Essentially, when you use a Debit Card, the amount is taken from the linked Savings Account or Current Account almost instantly. When you use a Credit Card, the amount will be charged to the credit limit, meaning you can pay the bill at a later date.

Credit Cards or Debit Cards: The comparison

• Credit Limit
  
  Credit Cards have monthly credit limits, which will depend on the kind of card you have, your relationship with the bank and your creditworthiness. Debit Cards can be used only up to the amount that is present in your bank account. However, the bank may have a daily purchase limit on your card.
  
  

• ATM withdrawals
  
  Cash withdrawals on a Credit Card attract a withdrawal fee and interest. Debit Cards generally do not levy a cash withdrawal fee, especially if you transact at your bank’s ATM.
  
  Both Debit Cards and Credit Cards have a daily cash withdrawal limit. In addition, Credit Cards may have a monthly withdrawal limit.
  
  

• Interest
  
  Credit Cards come with up to 50-days of interest free credit. To avoid interest, you must pay your outstanding amount by the due date. Since the amount is paid directly out of your account in the case of a Debit Card, you need not pay any interest.
  
  

• Annual fees
  
  Many Credit Cards have no annual fee. Some do charge an annual fee, which is waived off on achieving a certain amount of spends on the card. A few specialised cards charge an annual fee.
  
  Banks usually do not charge annual or renewal fees on Debit Cards.
  
  

• Benefits
  
  Credit Cards offer you a wide range of benefits and perks including cashbacks, discounts and, most important, rewards that you can convert into free flights and exciting gifts.
  
  Debit Cards also offers benefits such as discounts and cashbacks.
  
  

• Usage
  
  In terms of usage, there is generally no difference between Debit Cards and Credit Cards. Both can be used at merchant outlets and online. However, there may be certain types of transactions or websites which only allow the use of Credit Cards.
  
  

• Eligibility
  
  Most Credit Cards have basic eligibility criteria, based on income, existing relationship and creditworthiness. You can get a Debit Card easily if you have a savings or current account.
  
  

• Security features
  
  Both Credit Cards and Debit Cards have similar security features, such as SMS notifications, PIN and OTP. Many Credit Cards come with zero liability insurance* for stolen and lost cards, which Debit Cards don’t offer.
  
  

Are you looking to apply for HDFC Bank Credit Card? Click here to know more!

* Terms & conditions apply. Credit Card approvals are at sole discretion of HDFC Bank Ltd