Difference Between Credit Card & Debit Card

By: Bank of Baroda
Tue May 5, 2020
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4 Differences between Credit Card and Debit Card

When you open a bank account, you are provided with a cheque book, a passbook and an ATM-cum-debit card, also known simply as a debit card. After you’ve held your account with the bank for some time, the bank may even offer you a credit card. However, many people are often confused about the difference between debit and credit card and often assume them to be the same. So, we’ve listed the differences to help you understand. Let’s start with understanding the meaning of each card.

What is a debit card?

A debit card is a card that is linked with your savings or current bank account. When you open your bank account, the bank issues a card that you can use at ATMs and PoS terminals to withdraw money or pay for your expenses, respectively. The sums are automatically and instantly debited or deducted from your debit card. Banks provide free debit cards and charge a small annual maintenance fee.

What is a credit card?

A credit card is another type of bank card through which you can borrow money for a bank or financial institution. The issuer provides you with a line of credit, also known as a credit limit. This limit is determined based on your income and can be increased from time to time. The issuer bills you for your credit card expenses, and you need to pay them off by a stipulated date. If you fail to repay the sums borrower on credit, the issuer levies an interest rate on the money borrowed.

Credit card vs debit card

Having explained the meanings of credit and debit cards, let’s find out what is the difference between credit card and debit card. They are as under:

  • Bill vs account statement

People who have a credit card are sent a bill for the expenses incurred on the card each month. The issuer sends a bill explaining the minimum and total sums due. In the case of debit cards, the account holder can directly access the savings account to see the expenses incurred.

    1. Linking the card

The debit card is linked to your savings account, whereas the credit card is linked to the financial organisation or issuing bank offering the credit facility.

      1. Credit vs spending limit

Typically, credit card companies provide a credit limit, and you cannot borrow sums exceeding the credit limit. In the case of debit cards, banks issue daily cash withdrawal as well as PoS spending limits.

        1. Interest charged

The credit card issuer levies an interest rate if one is unable to repay the amounts borrowed on time. However, in the case of debit cards, money is not borrowed on credit, so no interest is charged.

Apart from the points mentioned above, a significant aspect of difference between debit and credit card is that debit cards are provided free of charge by the bank. In contrast, credit cards may be availed through an application or by invitation only.

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