Your Credit and Debit Cards are important financial tools that allow you to conduct various transactions securely. Let’s understand the difference between a Credit Card and a Debit Card, the pros and cons, and how to leverage each to their strengths.
Differences between a Debit Card and a Credit Card
The fundamental difference between Debit and Credit Cards is that you can access credit on the latter. A key reason for accessing credit is to purchase products and services when you are falling short of funds. On the other hand, your Debit Card allows you to transact using the existing funds in your Savings Account.
Debit Cards vs Credit Cards
Here’s a quick comparison between Debit Cards vs Credit Cards:
| Debit Card |
Credit Card |
| Withdraw funds from your Savings Account
|
Borrow funds from the card issuer per your credit limit |
| You fund your purchases |
Your card issuer pays the vendor, and you repay them as per your billing cycle |
| You do not receive a bill each month |
You receive a bill each month |
| Annual fees may apply |
Annual fees, late penalty and interest on the outstanding amount may apply |
| May come with a basic reward program |
May come with reward points, fuel waivers, cashback and exclusive deals |
| Debit Card EMI approvals as per your Savings Account balance |
Credit Card EMI approvals as per your credit limit |
Also Read: Credit Cards: Six reasons why you should have a credit card
What is a Credit Card?
This financial tool allows you to borrow money to purchase products and services. Your card issuer will set a credit limit based on your credit history, income and other factors. You can make purchases within this limit and make repayments as per your monthly billing cycle.
What is a Debit Card?
This financial tool allows you to withdraw funds from your Savings Account via an ATM. You can also go cashless by shopping for products and services online and offline using your Debit Card.
Pros and cons of Credit Card vs Debit Card
Debit Card: Pros and cons
| Pros |
Cons |
| Convenient and secure way to withdraw funds |
No access to credit |
| Go cashless when shopping |
Might have to pay fees when withdrawing funds from a different ATM |
| Never run into debt |
Basic rewards program / limited exclusive deals |
|
Does not contribute to building a credit history |
|
Annual fees may be applicable |
Credit Card: Pros and cons
| Pros |
Cons |
| Purchase products and services on credit |
Potential to run into debt if purchases do not align with cash flows |
| Go cashless when shopping |
Might incur fees such as late fees, annual fees, and interest on outstanding payments |
| Earn redeemable points, cashback and air miles |
Missed payments negatively impact credit score |
| Access fuel waivers and airport lounges |
|
| Enjoy exclusive deals on shopping, dining out, and other shopping experiences |
|
Also Read: Virtual debit card: The future of card payments
Credit Card vs Debit Card: How do they work?
Cash withdrawal
- Use your Debit Card at an ATM to withdraw funds based on your needs.
- Use your Credit Card at an ATM to access credit in the form of cash. However, the interest rate charged is higher and applicable from the moment you withdraw funds.
Shopping
- For online shopping, input all card details, including the CVV number for authentication. Input the OTP (one-time password) sent on your phone or email for further verification.
- For offline shopping, swipe your cards on a card machine and input a PIN for authentication. You can also use Tap & Pay for convenience.
Comparison between Credit and Debit Cards: Which is better?
- Your Debit Card is a necessity for convenient and flexible fund withdrawals.
- If you tend to splurge beyond your means, then shopping with your Debit Card is preferable to avoid falling into debt.
- If you budget and pay bills on time, then your Credit Card can be a boon. You can earn rewards on every spend and save on your monthly spending bill.
- Your Credit Card allows you to purchase items of a larger ticket size by accessing the EMI option at the point of sale. You can pay in instalments and earn redeemable reward points.
Also Read: 6 benefits of using a Credit Card
Conclusion
The key difference between Credit and Debit Cards is that the former allows you to access credit, while the latter enables you to transact using funds in your Savings Account.
Axis Bank offers a range of Credit Cards to suit every lifestyle need. From co-branded cards to travel cards, you can enjoy the benefits of reward programs, cashback, air miles, airport lounge access and fuel waivers. You can enjoy the best of both worlds by planning and using your Credit Card and Debit Card efficiently.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or 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. Please consult your financial advisor before making any financial decision
