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Credit cards and debit cards (Credit and Debit Card Difference) have become such an important part of our financial life today that it seems almost impossible to imagine everyday transactions, shopping and digital payments without them. Whenever we think of spending money from our bank account or doing digital transactions, the first thing that comes to our mind are these two plastic cards, but even today, a big question remains in the minds of crores of bank account holders of the country that what is the physical and technical difference between credit card and debit card. Many people consider these two to be the same, whereas in financial terms their functioning, methods of use and rules are completely different. If you also want to be financially wise and use your money properly and want to know which card can prove to be more beneficial for you, then it is very important for you to understand every nuance, advantage and disadvantage between these two in detail so that you can avoid any kind of financial loss in future.
Debit Card is a very popular plastic card issued by any bank to its account holders, which is directly and indirectly linked to the savings or current account in your bank. Whenever you open a new bank account, the bank provides you this card for free or at minimal charges. The biggest and special thing about this card is that whenever you make a purchase at a shop or make an online payment through it, the money is deducted directly from your bank account. This means that to spend with a debit card, you must have sufficient balance in your bank account, because you are using your own money. In this, the bank does not give you any kind of loan or loan, due to which you do not have to worry about making repayment to anyone or repaying the loan at the end of the month. Debit card has always been considered the safest and best medium to maintain financial discipline and spend within your budget, because in this you cannot spend more money than your capacity.
On the other hand, credit card is purely a borrowing facility or rather a short-term loan given by the bank, which is issued by the bank on the basis of your financial eligibility, CIBIL score and income proof. When you buy any item or pay a bill with a credit card, not a single penny is deducted from your bank account, rather the bank makes the payment to the merchant on its behalf. After this, the bank sends you a statement every month after a certain billing cycle, in which you have to repay the money to the bank within a fixed time limit (called grace period which is usually 20 to 50 days). If you pay the dues on time, the bank does not charge you any interest or extra charges, but if you default in paying the bill, the bank starts charging very heavy interest rates and late fees. Credit card is not just a means of payment, but it is a financial tool given by the bank on your credit which can be very useful to you in emergency situations, provided you use it with utmost wisdom and control.
There are countless benefits of using credit cards that make them quite popular in today’s digital age, especially for those who know how to control their expenses smartly. The biggest advantage is that it gives you the facility of emergency fund, that is, even if you do not have money in your bank account at that time, you can still easily buy the things you need. Apart from this, by shopping with credit card, you get great reward points, cashback, airlines miles and discount offers from the bank, using which you can save thousands of rupees in a year. This gives you better security while shopping online because the bank’s money is locked in it and in case of fraud, the option of charge back is available. Along with this, paying credit card bills on time strengthens your CIBIL score, which makes it easier to get a home loan or car loan in the future at a lower interest rate.
Debit card has its own distinct and very strong benefits which make it the first choice of the common man. Its biggest advantage is that it completely saves you from getting trapped in debt, because you spend only as much money as is already present in your bank account. There is no fear of any kind of hidden charges, annual maintenance fees or huge interest rates, so that you can manage your expenses without mental stress. Debit card is the most accessible medium to withdraw cash from ATM machine, and in any corner of the country you can easily get cash without any extra charges. For young people and newbies looking to learn financial discipline, debit cards are a great tool for learning budgeting as it teaches you the habit of living within your means.
Whether it is a credit card or a debit card, both have their own disadvantages and risks which cannot be ignored. The biggest disadvantage of credit card is that its easy availability prompts people to spend more than necessary, due to which they often get trapped in huge debt. If you are unable to pay your credit card bill on time, the annual interest rate and penalty of 35 to 45 percent can completely ruin your financial budget and your CIBIL score too. On the other hand, the main disadvantage of debit cards is that if your card is lost or its PIN is leaked, cyber thugs can directly drain the balance in your bank account, as the security layer provided by the bank is not as strong as that of credit cards. Additionally, on debit cards you do not get the big benefits of reward points or cashback that credit card holders easily get.
Now the biggest question arises that which of these cards will be most suitable and beneficial for you? The answer completely depends on your financial habits, monthly income and spending patterns. If you like to have complete control over your expenses, want to stay away from debt and want to live only within the limits of your earnings, then a debit card is the safest option for you. On the other hand, if you are extremely financially disciplined, know how to pay your bills on time and want to avail premium benefits like cashback on online shopping, rewards and airport lounge access, then a credit card can be a boon for you. It would be wise to assess your financial situation and make a balanced use of both the cards to get the maximum benefit while keeping your money safe.