Credit Cards vs Debit Cards
Gone are the days when you needed to have cash with you all the time while travelling or shopping. With the invention of debit and credit cards, the life of the customer has been simplified.
The main advantages of these cards are as follows:
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Being the best form of plastic money, any debit or credit card eliminates the necessity to keep cash constantly with you.
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These cards are accepted internationally.
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It makes you travel light and easy, owing to less baggage and lighter wallets.
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These cards are much simpler to use.
What is a debit card?
This card is issued against your checking account and is often called an ATM card also. You can make purchases by swiping this card on any payment machine. This draws the money from your saving or checking account. These cards can only be issued to account holders from the bank they hold an account in. The main thing required for this card to work is to keep a running balance in your account, otherwise you might just overdraw.
What is a credit card?
Credit cards work like small loans that you can carry with you. This is one of the most popular forms of consumer credit funded by a bank. The basic concept of a credit card is that the bank will lend you the money when you need it with the trust that you’d return it once you get the monthly statement and bill. There is an interest levied by the bank on all purchases or transactions done on your credit cards. Any bank can provide you a credit card, depending on approval and your existing credit score. You can login to the bank site and click credit card apply online to initiate the application process.
Difference between Credit and Debit Card
There are some very basic difference between a debit and a credit card. The differences are:
|
Comparison Levels |
Debit card |
Credit Card |
|
Source of money |
Checking or saving account of the card holder |
Bank will lend the money to the card holder. |
|
Credit line |
No credit line |
A fixed credit line which can be modified as per the payment history of the customer. |
|
Interest |
No interest charged on any purchases as the customer’s money is being used for all transactions. |
Interest is levied on the outstanding amount which shows up in the monthly bill being a part of the total amount due |
|
Monthly bills |
No |
Yes |
|
Credit score and history |
Does not affect the credit score or history |
Negatively affects the credit score and history if payments are not made on time. If the customer maintains a steady payment history with a low outstanding balance, then it also increases his or her credit score. |
|
Overdraft fees |
High as the overdraft is over and above the balance available in the account. |
Low as some companies allow overdraft over the credit limit. |
|
Benefits offered |
Cash withdrawal and cash back facility |
EMI options for different types of products specially on e-commerce websites |
|
Pin |
Required for all transactions as per RBI rule |
Not required other than cash withdrawal |
|
Financial burden |
Helps in regulating the spending habit of the customer as limited amount of funds are available in the account |
Increases the spending habit as some banks provide high credit limits on different credit cards. |
The choice of a debit or credit card depends on the customer. Both are equally valuable in their own respect. However, with their above differences, it should be easier to decide which one is the best.
For more information visit the given reference link - http://www.bankbazaar.com/credit-card.html
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