Most young individuals in India, whether salaried or engaged in business, usually carry a Debit or Credit Card. They use such a card for regular transactions like grocery purchases, fuel purchases, bill payments, and larger transactions. Although Credit and Debit Cards may look similar, each functions differently.

So, let us understand the difference between a Credit Card and a Debit Card and determine how using the cards could affect you financially.

About Credit Cards

A Credit Card lets you borrow funds to pay for services and products. Credit Card issuers determine a credit limit, and you can pay for purchases within this limit. When setting the credit limit, issuers consider your income, credit history, and various other factors. When using your Credit Card for purchases, you need to make repayments according to your monthly billing cycle.

About Debit Cards

A Debit Card is a financial tool that lets you use and withdraw funds from your Savings Bank Account.  

Differences

The essential differences between a Credit Card and a Debit Card include the following:

• You can use both cards to pay for purchases and make payments online and offline. The key difference between the two is that when you use a Credit Card, the money gets deducted from the credit limit of the card. However, when you swipe a Debit Card offline or use it online, the amount is deducted from your Savings Account.
• When you use your Debit Card, you fund your purchases. When you utilise a Credit Card, the card issuer pays the sum to the vendor. Later, you repay your issuer based on your billing cycle.
• When using a Credit Card, you receive a bill every month. However, you do not receive a bill every month for using a Debit Card.
• Credit Cards let you spend even when you do not have any funds in your Bank Account. Instead, you spend depending on the limit on your Credit Card. With Debit Cards, you can spend only the amount you have in your Bank Account.
• There is no interest charged for Debit Cards. However, when utilising a Credit Card, interest is charged on the outstanding amount when you have not paid it by the due date. Interest is also charged to your Credit Card when you use it at an ATM to withdraw cash.

Conclusion

A Credit Card could offer significant benefits if you have good financial discipline and use the card smartly. However, if you are an impulsive shopper and use your Credit Card without effectively planning out the repayment, it is better to stick to a Debit Card. This way, you can limit your chances of spending beyond your means.