Credit Card
Credit Card is a plastic card which offers the cardholder a line of credit. The customer is given a pre-determined limit, above which he cannot spend on his purchase. The maximum limit is set based on his monthly income and his credit history. Using credit card, you can purchase without paying at that very moment. The total amount of money spent is recorded in your credit card bill. If you pay the credit card bill within the grace period, then no interest is charged. After that period, an interest rate is charged on the outstanding amount. In short, when you use credit card for your purchase, the card issuer pays the merchant and in return you carry a debt to the card issuer.
Debit Card
Debit Card is nothing but a digitalized form of checkbook that is linked to the cardholder’s bank account. When you use debit card for your transactions, the money is debited from the bank account immediately. With the help of debit card, you have the free access to your money through ATM or can swipe the card when required at the merchant outlets. As money is debited from your account immediately, no bill is generated as such.
Points of Difference
| Feature | Credit Card | Debit Card |
| Credit Score History | Paying the credit card bill within the due date, helps in improving the credit score of the cardholder. | It does not affect the credit score of the cardholder. |
| Interest rate charged | If you dont pay your credit card bill in full within the due date, a higher interest rate is charged on the outstanding balance. | As no money is borrowed, no interest is charged. |
| Spending Limit | A pre-assigned credit limit is set on a monthly basis. | Cash withdrawal limit is assigned on a daily basis. But some debit card donot have this limit. |
| Process of Application | Depending on the credit score and other criterias, the process of receiving the credit card is somehow difficult. | Generally, there is no hurdle in the process of receiving the debit card. |
| Linked/Connected to | Linked to card issuing financial organisation. | Linked to the bank account of the cardholder. |
| Bill Generation | Credit card bill is generated after every biling cycle. | No bill is generated in case of debit card. But user’s account statement is generated. |
| Rewards | Credit card usage helps in earning rewards which includes- cashback and points or miles. | Debit card usage doesnot helps in earning rewards. But sometimes cashback offer is possible. |
| Fees | You can overdraw the amount exceeding the maximum credit line. This facility is offered by some credit card issuing companies. But the overdraw fee is low. | You can overdraw the amount exceeding the maximum account limit. But the overdraw fee is quite high. |
| Interest-free period | The interest free period ranges from your purchase date and the monthly biling cycle, which varies from 21 to 50 days. | Since the bill is settled in real time, so there is no concept of interest free period in debit card. |
| Protection | Liability protection feature and chargeback feature helps in safeguarding the credit card from fraud transactions. | No such features are available for debit card. But still you can opt for CPP (Card Protection Plan) to protect the debit card from fraud transactions |
| Fraudulent Liability | Quite low. | Very high. |
