Debit and credit cards are two of the most widely used payment options. Both have their unique features and functions. Despite some similarities, the two cards have their differences, and it is essential to understand them. Let's explore the key differences between debit and credit cards, their benefits, and more.

Difference between Debit and Credit Cards 

You get debit and credit cards from your bank and their main purpose is to serve you for making purchases. But these two cards have different functions and work in different ways. A debit card is linked directly to your savings account, which is not the case with a credit card. A credit card application means you are requesting to borrow money from the credit card issuer to make purchases. Here are some of the key differences between the two:

Access To Funds

A debit Card is available when you open a bank account, and the funds you use to make a purchase get deducted immediately from your account. Whereas Credit Cards are like loans that the issuing bank offers to you. When you use a credit card to make a purchase, you borrow money from the issuer, and you need to repay the money on or before the due date.

Customer-Friendly

One of the main differences between debit and credit cards is the way they are used. Typically, Debit Cards are used to make purchases or withdraw cash out of an ATM.

Credit Cards are more versatile; it helps make purchases, take out cash, transfer the balance of other cards, and more.

Security

Another difference between debit and credit cards is the level of security they offer. If your debit card is lost or stolen and someone uses it, you may lose your funds until you report the debit card loss and get it blocked. 

On the other hand, credit cards come with certain protections, including zero liability insurance which debit cards don't offer.

Interest Rates

If you have a payment due on your credit card, interest will be charged, and it could go high if the same is unpaid after the due date. In contrast, debit cards do not have any interest charges, as they are linked directly to your bank account.

Process Of Application

The process of Credit Card Application is very simple: 

  • The first step is to fill out an application form and provide some personal and financial data, like your name, address, income, and employment details 
  • Now, your credit history will be taken into account. If you have a good credit score, you will likely be approved for a credit card. In case you have a poor credit history, you might not get approved for a credit card 

On the other hand, to apply for a debit card, the steps are -

  • Choose a bank with good services and a reputation to open a bank account
  • Provide your personal information, like your name, address, and government-issued identification and address proof
  • Once your bank account is open, they'll issue a debit card

Benefits Of Debit And Credit Cards

Both debit and credit cards have their own benefits. Here are a few of them:

Debit Card:

  1. Convenience: Debit cards are a quick and easy way to make purchases or withdraw cash. They can be used at any retail store that accepts card payments and is a convenient alternative to carrying cash
  2. No Interest or Fees: Unlike credit cards, debit cards do not carry any interest on the used amount
  3. Direct Access to Funds: Debit cards are linked directly to your bank account, so you have immediate access to your funds
  4. Safety: Debit cards are protected by a PIN, making them a more secure option than carrying cash.  
  5. Budgeting: Debit cards can help you stick to a budget, as you can only spend the amount you have in your bank account.

Credit Card:

  1. Credit History Development: Using credit cards in a responsible way can help you establish a good credit history and increase your credit score
  2. Benefits and Incentives: Many credit cards include benefits and rewards, such as cashback offers, reward points, or gift vouchers.
  3. Protection Against Fraud: Credit cards come with zero liability insurance, so you are protected in the event of fraud or theft. 
  4. Emergency Funds: Credit cards can prove to be a good source of emergency funds in the event of an unexpected expense

Conclusion

Debit and credit cards have their unique features and benefits. They may look alike, but both of them have significant differences. So while getting these cards or using these cards, be aware of the differences between the two. If you are looking for a simple and convenient way to make purchases or withdraw cash, a debit card may be the best option for you. However, if you are looking to build your credit history, use a credit card.