The difference between a debit card and credit card

difference between debit and credit cards

Both credit cards and debit cards provide a practical alternative to cash or checks, and both are accepted almost everywhere. But the similarities stop there. These two cards are major pillars of the digital banking system.

Nowadays, everyone has one of them, or frequently both. These cards play a crucial role in the distribution of funds for everyday expenses.

However, despite their similarities, they are fundamentally distinct from one another; otherwise, neither would exist. The source of the funding and potential costs are the key distinctions.

This article goes into great detail about what credit cards and debit cards are, focusing mostly on the distinction between credit cards and debit cards.

Credit card

A credit card is provided by a bank or financial service organization, it is a thin, rectangular piece of plastic or metal that provides you with a credit line that you can use for purchases, debt transfers, and/or cash advances while requiring you to repay the loan amount at a later date.

You have access to a line of credit through your credit card, which allows you to borrow money for purchases and return it later.

The credit card issuer may additionally provide cardholders with a separate cash line of credit (LOC) in addition to the usual credit limit, allowing them to borrow money in the form of cash advances that may be accessed through bank teller machines, ATMs, or credit card convenience checks.

Interest is levied on purchases made with credit cards. Stores, banks, and other financial institutions may issue credit cards, which frequently come with benefits like cash back, discounts, and reward miles.

Debit card

When you make purchases using a debit card, which is connected to your checking account and protected by a PIN, funds are deducted from your available balance. Your debit card can be used to withdraw cash from an ATM or receive cash back at some retailers.

They are also known as “check cards” or “bank cards,” and they may be used to make purchases of products and services, as well as allow you to add more money to a transaction online.

Which is better; a credit card or a Debit card?

Both debit and credit cards can be used to make purchases, however, depending on the type of card you use, different payment processing procedures apply. Due to the fact that debit cards are connected to your bank account, each time you make a transaction, money is automatically taken out of your account.

Below are some differences between a credit card and debit card

ParametersDebit cardCredit card
Fund sourcePull funds from a checking accountFunds are from your line of credit
Purchase restrictionsDebit cards often have daily purchase restrictions, so you might not be able to use one to make a very large transaction.Credit cards don’t have a daily limit provided by the issuer but a user can have defined daily limit 

No invoice or statement is provided.Every month, you receive a bill or statement with information on the transactions you have made.
PinThe majority of the time, debit card purchases may be done with or without a personal identification number (PIN).Credit cards functions with or without PIN, ou only need a PIN if you plan to use your card for cash advances at ATMs or to make purchases at automated kiosks
IncentivesSome debit cards have reward schemes that are comparable to those offered by credit cards, such as a 1% back on all transactions.When a credit card is used, many of them provide incentives, such as points that may be redeemed for vacation or retail discounts. 
InterestsYou won’t pay interest on your purchases.The interest on outstanding amounts might accumulate if you don’t make monthly payments is one of the major disadvantages of using a credit card for purchases. If you let the amount owed grow, a high-interest rate might ensnare you in debt forever.
Credit historyDebit card usage won’t have an impact on your credit history.When you use a debit card to pay, the funds will almost instantly be removed from your account
Charges and fees

There are relevant annual fees and PIN regeneration costs.There are several fees associated with credit cards. These include, among others, membership fees, yearly fees, late payment costs, and returned checks fees.

Depending on your financial condition and purchasing patterns, you can choose between using a debit card and a credit card. You can base your decision on these distinctions and what you are aware of as being beneficial for you.