difference between debit card and credit

Difference Between Debit Card and Credit Card

When it comes to making payments, debit and credit cards are two of the most popular options used today. While they may look alike, they operate differently, and it’s essential to understand the differences between the two to make an informed choice. Here’s what you need to know:

Debit Cards

A debit card is a card that allows you to access money directly from your bank account. You can use it to withdraw cash from an ATM, purchase goods from a store, or shop online. One of the benefits of a debit card is that you can only spend what you have in your bank account; there is no credit facility to fall back on. This means that as long as you have enough money in your account, you can use your debit card with confidence.

Another advantage of using a debit card is that you don’t have to worry about interest charges or debt. Since you’re spending your own money, there’s no credit facility to pay interest on or repay. However, this also means that if your debit card is stolen or lost, the money in your bank account may be at risk, and it may take some time to resolve the issue.

Credit Cards

A credit card works quite differently from a debit card. It is a card that enables you to borrow money from a credit issuer to pay for goods and services. With a credit card, you have a credit facility that lets you borrow money that you will need to repay later, often with interest.

One benefit of using a credit card is that it can improve your credit score if you use it responsibly. For example, if you make regular payments on time and keep your credit utilization low, your credit score can increase over time.

There are also other benefits to using a credit card. Some credit cards offer rewards programs or cashback programs, which allows you to earn points for every purchase you make. You can then use the points or cashback you earn to purchase goods, travel, or pay off your credit card balance.

Conclusion

Both debit and credit cards have their advantages and disadvantages, and it’s up to you to decide which option is best for you. If you prefer to use your own money and want to avoid potential debt and interest, a debit card may be the best option. If you want to earn rewards or build your credit score, a credit card may be the better choice. Whichever one you choose, be sure to use it responsibly and always pay your bills on time.

Table difference between debit card and credit

Debit Card Credit Card Definition A plastic card issued by a bank that allows you to withdraw money from your account, or make purchases with the money you already have. A plastic card issued by a financial institution that allows you to borrow money to make purchases and pay back the balance at a later time. Spending Limit The spending limit is based on the amount of funds available in the linked bank account. The spending limit is set by the bank or financial institution based on the borrower’s creditworthiness. Interest Interest is not typically charged on purchases made with a debit card, but may be charged on overdrafts. Interest is charged on the balance of the card if not paid in full by the due date. Debt There is no debt incurred with a debit card since you are spending your own money. Credit card purchases are essentially loans, and if not paid back in a timely manner, can result in accumulating debt. Rewards Debit cards may offer rewards programs, but they are typically not as lucrative as credit card rewards. Credit cards often have reward programs that offer points or cashback on purchases.