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Difference between Credit Card and Debit Card

Cards have become a part of our lives. We go for cashless transactions most of the time. And amidst this pandemic phase, going cashless has become the safest way to pay for certain things. Credit cards and debit cards are used widely in every country by everyone. Now, what is a debit card and a credit card? We have been carrying these cards and making payments, but we do not know the difference between them, their benefits, and their cons. It is always advised to issue a credit card or a debit card after knowing everything about it. It enhances your knowledge, and you would know certain things about banks.

Credit Card vs Debit Card

So, without further ado, let us first discuss the points of contrast between a credit card and a debit card.

1. A credit card is defined as a card that allows you to take debt from a loan to a specific limit. On the other hand, a debit card is defined as the card that deducts your money as soon as any payment is made from the customer?s side.
2. Customer protection is better in credit cards as the consumer is protected and helped in terms of fraud. There is no customer protection in debit cards as the money is readily deducted from the consumer?s account.
3. According to some reports, credit cards do not take annual fees anymore. On the other hand, the new debit cards that are being issued provide facilities like protection from fraud or theft.
4. Consumers can spend more than they have in their bank accounts. Consumers can only spend the amount that they have in their accounts.
5. The credit card company pays for whatever the customer has bought. One has to pay to the credit card company after borrowing from them. On the other hand, the customer pays for whatever he/ she has bought.
6. A bill is given to the customer for whatever he/ she has purchased from the funds of the credit card company. There is no bill provided in the debit cards.
7. The bill that is provided to the customer has to be paid every month. There is no provision for payment of bills in a debit card as the customer uses his/ her own money.
8. When one issues a credit card, many small charges or a fee has to be given by the customers. Charges like joining fee, annual fee, bounced cheque fee, etc., are given by the customers. In order to issue a debit card, the annual fee and the PIN generation amount have to be given.
9. A high rate of interest is charged if the person hasn?t paid the borrowed amount. No interest is charged for using a debit card.
10. A person using credit cards enjoys several benefits like cash-backs, reward points, etc. These benefits can be redeemed later for paying back the money. On the other hand, negligible or zero benefits are provided for using the debit card.
11. Consumer protection is provided in credit cards along with the lost liability. Protection from fraud or theft is not provided in debit cards.

So, these are the primary points of contrast between credit cards and debit cards. Now, you must be wondering as to which card is better. Well, if one tends to overspend his/ her money, then he/ she must issue a debit card. When the money gets deducted directly from the bank account, then one tends to spend less money. On the other hand, if one goes for shopping or other transactions, then credit card usage is advised. As customer protection is more in credit cards, using a credit card is recommended for online and offline shopping. Along with shopping, credit cards must be used for booking flights, going on a vacation, etc. Both credit card and debit card have their own benefits and cons.

Benefits of Credit Cards:
  • Credit cards are very convenient. It is the best way to go cashless wherever and whenever you want.
  • A credit score is built by using credit cards which will help you further to repay your bills.
  • The reward points in credit cards are higher than debit cards. These reward points can be redeemed in order to pay the borrowed funds.
  • Credit cards offer high credit limits. Therefore, flexibility is provided to the customers in terms of spending money.

Cons of Credit Cards:

  • If a customer is unable to pay the bills, then he/ she would be charged with a high interest rate.
  • In order to issue a credit card, one has to pay several kinds of fees like joining fees, annual fees, etc.
  • If the bill is not paid on time, then it weakens the credit score.
  • When the credit limit is there, the customer tends to spend more. This, in turn, leads to debt.

Pros of Debit Cards:

  • A customer does not have any debt as one is using their own money.
  • A customer is charged with a zero interest rate.
  • A debit card serves as an ATM card. This card can be used in any ATM to get ready-forward money.
  • Issuing a debit card is much easy and affordable as no extra charge is applied.
  • No credit score or history is built in debit cards as the money is readily paid from the bank account.

Cons of Debit Card:

  • If a track for spending money is not kept in debit cards, then an unbalance can be seen in the passbook.
  • An extra fee is charged if a person uses the debit card in an ATM of another bank.
  • Negligible or zero protection is provided to the customers in terms of fraud or theft.

So, these are some pros and cons regarding credit and debit cards. Credit cards and debit cards are an essential part of our day-to-day routine. During this situation of the pandemic, everyone wants to go cashless. Well, both debit and credit cards have their own benefits and negative effects. Therefore, the customers are advised to issue the cards based on their discretion. As mentioned above, credit cards must be used for spending money in auctions, vacations, properties, etc. But if one is an over-spender, then he/ she must use a debit card. It limits one?s overspending, and the person is able to save money. Thus, both debit and credit cards have their own share of pros and cons, and they must be used wisely while making transactions.

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