Credit Card vs Debit Card: Difference Between Credit Card And Debit Card

Debit and credit cards appear similar—they are the same size, have the 16-digit card number, and your name and the card’s expiry date are mentioned on both. Moreover, you can use these cards to make cashless payments and withdraw money from an ATM. But are they really the same? Well, there is a lot of difference between credit card and debit card. This article covers everything you need to know about how these identical-looking cards differ.

What Is Credit Card?

A credit card is a type of unsecured personal loan which you can repay within 20 to 50 days. It is an interest-free loan if you pay it back on time. Failing to do so might also lead to a penalty fee along with the due interest.

What Is Debit Card?

Your bank issues the debit card against your savings or current account. When you use the card to withdraw money from ATM or swipe it to purchase something, the amount is immediately deducted from your account. So, your bank balance is the spending limit of the debit card.

What Is the Difference Between Credit Card And Debit Card?

Are you wondering, “what is the difference between credit cards and debit cards?” The major factor that shows the difference is the credit limit. With the use of debit cards, you can make purchases using money that has been deposited in a bank. With credit cards, you can borrow money from the card issuer up to a predetermined limit in order to make purchases or cash withdrawals. Most likely, you carry a debit card and at least one credit card in your wallet.

Using a debit card is like using cash in hand, as you can spend only what you have. But credit cards come with a credit limit that is not dependent on your bank balance. The credit limit is the amount of money you can spend using your card. It depends on the type of credit card you have, your bank, salary, and other aspects. In some cases, the credit limit can be three times your monthly income, which comes in handy in times of financial emergencies.

Apart from the credit limit, there are other credit card and debit card differences, too. The below table explains the dissimilarities.

Credit Card vs Debit Card


Debit card

Credit card

Payment source

You pay from your bank account.

The credit card company pays at first. You must repay the amount as per your billing cycle.


The transactions are recorded in your bank statements, there are no separate statements for the card.

The credit card company sends you a transaction statement every month.


PIN generation and annual maintenance fee.

Joining fee, late payment fee, annual fee, and multiple other costs.


No interest is charged as the amount is deducted from your bank account.

Interest is charged if you do not pay the bill within the due date. 

Fund limit

Equals to your bank account balance.

Equals to the card’s credit limit.


Minimal rewards on spending.

Cashback, reward points, air miles, and much more. 

Additional privileges

Generally, not many privileges.

Plenty of privileges like discounts on travel, dining, entertainment, retail, and more depending on your card type.

Lost card protection

Minimal liability protection

100% liability protection in case of a lost card, ensuring you do not pay for unauthorized expenses 

Advantages of Credit Card

  • Convenience: Credit cards eliminate the need for carrying cash all the time. You can use the card for payment in most places.
  • Future loans: If you plan to opt for any loan in the future but have a low credit score, the card will help you improve it.
  • Rewards: Using a credit card enables you to receive many rewards in the form of points, cash back, and other facilities.
  • Spending flexibility: Unlike debit cards, a credit card’s spending limit does not depend on your bank balance. This flexibility is helpful when you need to make significant purchases and do not have enough money in your account.

Disadvantages of Credit Card

  • Transaction charge: When you use the card in a shop or restaurant, the credit card company charges the establishment a transaction fee. The business includes this charge in your bill; so, eventually, you end up paying it.
  • Maintenance charge and other fees: Some credit card companies charge you a flat annual maintenance fee. They also charge a minimum spending fee if you do not spend a fixed minimum amount in a year. Additionally, you need to pay a 3.5% cash advance fee when using the card to withdraw cash from ATMs. Moreover, they charge interest on the withdrawn amount per day until you pay the credit card bill.
  • Minimum payment amount: Credit card bills come with a ‘minimum amount due’ option. But, if you pay only the minimum amount, the company will charge you interest on the remaining balance next month. Suppose your credit card bill amount is ₹10,000 and the minimum amount due is ₹500 (5% of the total due). If you pay only the minimum amount, the company will charge you a 3% interest on the remaining ₹9,500. So, you would have to pay an additional amount of ₹285 in the following month. If you keep paying only the minimum due amount every month, it will take you 34 years to pay off the bill! The total amount will be ₹23,254 (₹10,000 + interest).

Advantages of Debit Card

  • No debt: Debit cards deduct the transaction amount directly from your bank account. So, there is no debt involved.
  • No interest: You do not need to pay any interest amount on your spending, making debit cards more affordable than credit cards.
  • ATM withdrawal: You can use it as an ATM card to withdraw money from your bank account at any time.

Disadvantages of Debit Card

  • Dependent on bank balance: Using a debit card, you can only spend up to your bank account balance. This can be an issue during financial emergencies.
  • Withdrawal fee: If you use the card to withdraw money from a different bank’s ATM, they may charge you a fee.
  • No effect on credit score: Unlike credit cards, a debit card will not help improve your credit score.

Reasons Why You Should Use Credit Card

In the credit card vs. debit card argument, credit cards undoubtedly have more benefits. Two essential advantages of a credit card are as follows:

  • Credit score: When you apply for a loan, the lenders check your credit score to determine if they can trust you to repay the amount. A score of 750 or higher is considered good. If you have a lower credit score, getting a new credit card can help. If you keep paying your credit card bills on time, it will help improve your credit score.
  • Rewards: Most online stores offer cashback and discounts if you pay using a credit card. So, these cards can help you save money on purchases. You can also earn reward points for every transaction and use these as money later to shop for products, vouchers, and much more.

Reasons Why You Should Use Debit Card

  • Spending control: When you use a debit card, you cannot spend more money than you already have in your account. If you want to keep track of your expenses and avoid overspending, a debit card is suitable for you.
  • Inexpensive: Debit cards do not require you to pay any interest, and they have a much lower number of associated fees than credit cards, making them less expensive.

How to Choose the Right Credit Card?

There are two types of credit cards, unsecured and secured. A traditional credit card is considered unsecured as it is a type of personal loan. Credit card companies do not have any security against lending. You can choose this type of credit card if you are confident about paying your bills on time and not overusing it.

If you are looking for a stress-free option, you may choose a secured credit card. This is the type of card the lenders can issue against your fixed deposit (FD) account. The card limit will be 90% of the FD balance. As the lender already has access to your money, you will be more careful about spending.

When you are applying for a credit card, always negotiate with the representative to get the best possible deal. Remember, as the customer, you hold the power!


1.  Should I take a credit or debit card?
Both have their distinct advantages. Now that you understand what credit cards and debit cards are, decide which one to choose as per requirements.

2. Do debit cards have reward points?
Yes, but credit cards offer comparatively more reward points and offers than debit cards.

3. What is the withdrawal limit on debit cards?
You can use debit cards to withdraw money from ATMs, but there is a limit on the amount. It varies among different banks, but it generally is ₹20,000.
A primary difference between credit and debit cards is the financial freedom offered by the former. Credit cards are beneficial when you are in urgent need of money, like a medical emergency. So, if you use it as an essential financial tool and not an instrument for impulse shopping, a credit card can be an asset.

In this article

FinForAll By Jupiter, Money

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