Difference Between Credit Cards and Debit Cards: All You Need to Know

Before choosing a payment method, understanding the difference between credit cards and debit cards in depth is the way to go. While both of these cards look similar and offer a way to transact online and offline, they differ on various points.

Pay attention to the pros and cons of these cards to opt for the right option.

Credit Cards Vs Debit Cards

Here are some key differences between credit cards and debit cards:

Parameter Debit Card Credit Card
Source of Funds Funds are deducted from your bank account The card issuer sanctions an approved limit from which you borrow funds
Spending Limits You can only spend the balance available in your bank account You can spend up to the allotted credit limit
Availability Banks provide these cards when you open a bank account You need to apply for it, and you’ll get it if you meet the card issuer’s eligibility criteria
Repayment There’s no need to make any repayment, as you aren’t borrowing funds You need to pay credit card bill online or offline at the end of the billing cycle
Associated Fees and Charges Minimum balance maintenance charges, ATM cash withdrawal fee, etc. Joining fee, annual renewal fee, interest charges, late bill payment fee, etc.
Interest Charges You do not incur any interest charges 
  • Interest charges are applicable on the outstanding bill amount
  • Pay the total amount on time and in full to avoid these charges
Perks and Privileges Lesser cashback options, discounts and rewards as compared to credit cards Numerous perks, including fuel surcharge waivers, cashback offers, and welcome bonuses
Impact on Credit Score It will not affect your score since you aren’t taking any credit Non-repayment of bills can hurt your credit score

Pros of Using a Credit Card

Getting a credit card can be beneficial as it:

Offers a Line of Credit

  • With a credit card, you enjoy quick funding to meet your various planned and unplanned expenses, like:
  1. House rent
  2. Utility bills
  3. Grocery shopping
  4. Loan EMIs
  5. Medical expenses
  • This short-term financing option helps you manage easily during a financial crunch, allowing you to repay the borrowed amount later.
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Helps Build a Positive Credit History

  • Timely repayment of your credit card bill reflects positively on your credit report.
  • These payments are recorded by credit bureaus, enabling you to establish a spotless credit history.
  • A good score can make it much easier for you to get credit in future to tackle financial emergencies.

Provides Additional Perks and Rewards

  • Credit cards offer a number of perks, allowing you to get the maximum value from them.
  • These attractive perks include:
  1. Welcome or joining benefits
  2. Reward points on transactions
  3. Cashback on purchases
  4. Discounts and deals
  5. Limited-time and festive offers

Disadvantages of Using a Credit Card

Using credit cards does come with certain limitations as well:

Associated Fees and Charges

  • If you don’t check the terms and conditions of the card issuer, you may end up paying high charges that can increase your borrowing costs.
  • Choose a credit card with affordable charges, such as annual renewal or joining fees, interest charges, late payment fees, etc. 

Non-Repayment Affects Credit Score

  • If you don’t pay the credit card bill on time and in full, the issuer levies interest on the outstanding amount.
  • This can turn into a financial burden, and you may end up repaying for a longer period.
  • Lastly, it can affect your credit score, restricting your chances for future credit approvals.

Benefits of Using a Debit Card

Check out the pros of debit cards:

No Need to Borrow Funds

  • With debit cards, you don’t have to face the burden of borrowing and repayment since you use the funds that are already available in your bank account.
  • This way, you spend within your budget and steer clear of overspending.

No Annual Fee or Interest

  • Interest charges don’t apply to this payment option since you aren’t borrowing funds.
  • Financial institutions don’t charge any annual fees on debit cards.

Limitations of Using a Debit Card

Here are some cons of using a debit card:

No Additional Perks

  • Debit cards have fewer additional benefits as compared to credit cards. 
  • You generally don’t get as many perks like cashback on transactions, limited-time offers, reward points on payments, etc.

No Opportunity to Build Credit History

  • Debit cards won’t help if you are looking for a way to improve your credit history.
  • This is because debit cards deduct money directly from your bank account, and you don’t get a chance to prove your creditworthiness.

With these pros and cons in mind, you can decide if opting for a credit card is beneficial for you. Looking to get a new credit card? You can go with the One Card Credit Card to enjoy a range of perks.

 This card allows you to convert your expensive purchases into budget-friendly EMIs, enjoy discounts on dining and shopping transactions and get up to 5X rewards on top spends, among other benefits. What’s more, it comes with zero joining fees and no annual renewal fee. Apply now to get your hands on the card and enjoy these benefits.


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James Thomas
James Thomashttps://timesinsider.org/
James is the Managing Editor at Times Insider. James joined Times Insider in ​recent 2023 in the newly created position of managing editor, designed to help the foundation. He is responsible for overseeing the daily flow of content across Times Insider digital channels, as well as editing, writing and managing content for Times Insider website and blog.