What is the difference between Credit Card and Debit Card?

Posted on Friday, June 16th, 2023 | By IndusInd Bank

You might often wonder whether to use a debit card or a credit card or both. Both cards look similar and have many common functions, but they also have some important differences that can affect your finances and your credit score. In this blog post, we will explain the main differences between debit cards and credit cards, as well as their pros and cons, so that you can make an informed decision. 

What is a debit card? 

A debit card is a card that deducts money directly from your savings or current account when you use it to pay for goods or services. You can also use it to withdraw cash from ATMs or do online banking transactions. 

What is a credit card? 

A credit card is a card that allows you to borrow money from the bank to pay for goods or services. It is linked to a line of credit that has a pre-set limit based on your creditworthiness. You have to pay back the money you borrowed, by a due date every month along with applicable interest and fees if paid after the due date  

What are the main differences between debit cards and credit cards? 

• Source of funds: With a debit card, you are spending your own money that you already have in your bank account. With a credit card, you are spending the bank’s money that you have to repay later. 
  
• Spending limit: With a debit card, you can only spend up to the amount available in your bank account, unless you have an overdraft facility. With a credit card, you can spend up to the credit limit assigned by the bank, which can be higher than your bank balance. 

• Interest and fees: With a debit card, there is no interest charged on your purchases, unless you overdraw your account. With a credit card, there is interest charged on your outstanding balance if you do not pay it in full by the due date. You may also have to pay other fees such as joining fees, annual fees, late payment fees, cash advance fees, foreign transaction fees, etc. 

What are the Advantages & Disadvantages? 

Debit Card Advantages 

• No debt involved: You are using your own money that you already have, so there is no risk of getting into debt or paying interest. 
  
• Cheaper to use: There are no interest charges or high fees involved in using a debit card (unless you overdraw your account). 
  
• Easy to get: Approval for a debit card is easier and faster than for a credit card, since you do not need a good credit history or score. 

Debit Card Disadvantages 

• No credit building: Using a debit card does not help you build your credit score, which can affect your ability to get loans or other credit products in the future. 

• Limited rewards and benefits: Debit cards do not offer many rewards or benefits compared to credit cards, such as cashback, air miles, reward points, etc. 
  
• Low fraud protection: Debit cards do not offer much protection from fraud or theft, and you may have to bear some liability if your card is used without your permission. 

Credit Cards Advantages 

• Credit building: Using a credit card responsibly can help you build your credit score, which can improve your chances of getting better loan terms or other credit products in the future. 
  
• More rewards and benefits: Credit cards offer more rewards and benefits than debit cards, such as IndusInd Bank Club Vistara Explorer Credit Card is great for travel and hotel benefits. You may also access IndusInd Bank EazyDiner Credit Card for various dining, shopping and entertainment benefits. 
  
• High fraud protection: Credit cards offer high fraud protection, and you are not liable for any unauthorized transactions made with your card if you report it immediately. 

Credit Cards Disadvantages 

• Debt risk: f you do not pay your bills on time or spend more than you can afford, you may get into debt or damage your credit history and score. 

• Expensive to use: There are interest charges and fees involved in using a credit card, which can add up to a significant amount if you do not pay your bills in full by the due date. You may also have to pay extra fees for cash advances, foreign transactions, etc. 
  
• Processes & Approval: Approval for a credit card is harder than a debit card since you need a good credit history and score to qualify for one. However, IndusInd Bank smoothens your application process online in 4 easy steps. 

How to choose between debit cards and credit cards? 

Well, it depends on your personal preferences, financial goals, spending habits, and budget. Ask yourself: 

• Do you want to avoid debt or interest charges? If yes, then a debit card may be a better option for you. 
  
• Do you want to improve your credit score? If yes, then a credit card may be a better option for you. 
  
• Do you want to enjoy more rewards or benefits? If yes, then a credit card may be a better option for you. 
  
• Do you have enough savings for all your expenses? If yes, then a debit card may be a better option for you. 
  
• Do you need access to more money than what you have in your bank account? If yes, then a credit card may be a better option for you. 

Conclusion 

 Before choosing one over the other, make sure that you understand how they work, what their pros and cons are, and how they suit your needs. Use them wisely and responsibly to avoid any financial troubles or regrets. 

If you want to apply for an IndusInd Bank Credit Card, click the button below. 

Apply Now 

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.