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What Are The Differences Between A Debit Card And A Credit Card?

The trend of cashless payments has become a preferred choice for all those people who have been seeking alternatives to using cash in their daily transactions.

The main reason behind the popularity of cashless payments is that you no longer have to carry a bundle of currency notes instead all you need to carry is a plastic card or just an app on your smartphone.

However, the convenience element took a backseat and was replaced by a need to carry out cashless transactions following the ban of around 84% of currency notes in circulation.

Demonetisation really benefitted the mobile wallet industry with key players such as Paytm, MobiKwik, and Freecharge. Still, most cashless transactions were carried out through cards, i.e. both by debit cards and credit cards.

In terms of penetration, debit cards score over the credit cards in India simply because most of the banks offer you a debit card along with your banking account. Moreover, ATMs can be easily found in an urban area as well.

In the following sections, first, I will introduce both credit and debit card, followed by their differences.

Credit Card

It is a payment card allowing you to pay for the goods and services based on a line of credit offered to you by the bank.

Key Features:

  • Credit limit
  • Bonus points
  • Alternative to cash
  • Grace period
  • Gifts and rewards

Debit Card

Also known as a bank card, plastic cash, a debit card is the most convenient & secure way to say no to cash. Using a debit card, you have easy access to your funds in your bank account around the clock.

You can use this card to make payments every time you shop online and use it at point-of-sale (POS). A debit card can be used for making balance enquiry and generating mini-statement from your nearest ATM.

Now that I have explained both credit card and debit card, the following are the key differences between them.

Credit cards and debit cards side by side

Debit cards are linked to your bank account; thus, whenever you use your debit card to make a payment or withdraw money, the payable amount gets deducted from your account. So, each transaction will show as a separate charge on your bank account statement. The amount you can spend will depend on the total balance of the account that your debit card is linked to.

As for credit card, you have a pre-determined limit, which is the utmost amount you can have as a short-term loan. Whenever you complete a transaction, using a credit card, a portion of limit is used to pay for the product or service, and this accordingly decreases your credit limit.

You can carry out multiple transactions using your credit card as long as you have not exceeded the limit. Moreover, you don’t have to make separate payments to cover your card’s expenses.

EMI Option

If you have used a debit card to make purchases, you will have to pay the total bill amount in one go, even though you may be able to pay off the bill using multiple debit cards. On the other hand, if you are a credit card owner, you can easily convert all your purchases into EMIs of up to 24 months.

Yes, you have to pay interest of 2% every month on the outstanding amount and additional charges, including service tax. Make sure you know that the outstanding amount gets blocked and it is released bit by bit as subsequent payments are made.

Reward Points

Entirely depending on the credit card, you are using, you may receive reward points or air miles that you can use to receive cashback rewards, gifts, service upgrades, travel class upgrades and much more.

You don’t get to enjoy such rewards if you have a debit card, the main reason is that most banks are not a part of the rewards programs. Having said that, there are still some exceptions including, Axis eDGE Rewards Program, DBS Bank DigiRewards Program, South Indian Bank Reward Program.

Security And Protection

Whether you have a credit card or a debit card, both are now secured with PINs. Having PINs, the overall security of your transactions is assured. This is surely a welcome change from the earlier system of single factor verification where a PIN was not required for your credit card transactions. In contrast, debit card transactions required a PIN to complete the transaction.

Moreover, most of the credit cards have liability protection feature. As per this feature, you have protection against fraudulent transactions made on your credit card.

Speaking of features, credit cards also have a chargeback feature that provides refunds if any transaction has not been authorised by you and thus have been disputed. Debit cards don’t enjoy such features, and if you want to protect your card from misuse, you have to apply for card protection plan (CPP) separately.

Interest-free Period

There is no such thing as interest-free period if you have a debit card. On the other hand, the expenses made using a credit card is not settled instantly but only when you have paid your credit card bill by the due date. Generally, the due date is 21 days after the bill’s generation by your credit card company.

Therefore, depending on your billing cycle and date of your purchase, the interest-free period after purchase may range between 21 and 50 days.

Credit Score

The credit score is one important reason why some people may get approval for new loans or credit cards, while others struggle to cut. Currently, only four credit bureaus offer credit scores in their credit reports – Equifax India, CIBIL TransUnion, CRIF Highmark, and Experian India.

Credit reports are made based on your previous dealing with credit instruments such as credit cards and loans.

However, rest assured bank account, and the credit bureaus do not track debit cards. Thus, no matter how you are using your debit card, it won’t affect your credit score.

When you use your credit card with adequate financial discipline, it tends to improve your credit score. Thus, as long as you are not extending your credit card’s advantage, it will prove helpful in improving your credit score.

About Sophia Jones

Sophia Jones tries to live her life like the sun – setting her sights high and vowing to always rise up again. Always game for an adventure, Sophia loves widening readers and her own expectations of our vast, beautiful world. As a journalist, Sophia writes to inform. As a creative writer, Sophia strives to inspire. Overall, she hopes to captivate. She currently writes for on credit cards, banking, insurance and investing etc.