Like many people, you are probably not sure of the difference between debit and credit cards. After all, both look the same and have the same payment gateway. More importantly, when it comes to purchasing something, you pay in a similar way. The basic difference between debit and credit cards is related to the use of funds. When you pay using a debit card, the money goes straight from your bank account, but in case of credit cards, you get the money from a line of credit, for which the credit card issuer will debit your bank account later. Here’s more on what you need to know.
A debit card is typically issued by a bank, and when you are using your card for payments, you are likely to use a PIN to make the purchase. Debit cards are secure, and there is little risk when it comes to overspending. A credit card, on the other hand, gets the money from the issuer through a line of credit, and there is a limit to the card, which is the maximum you can borrow, also known as the credit limit. There is an interest that you pay after the first month, which may vary from one card to another. As long as you make the payments every month, so there is no need to pay interest.
When it comes to getting a debit card, banks are not bothered by your credit score, because you are essentially paying from the money in your account. That’s not the case with credit cards, where your credit score matters. You actually need to build a credit score, which will come in handy when you want to buy a car or house. With credit card these days, you can get amazing rewards and zero-cost EMIs, which are not available with most debit cards. There are also cashback prizes and rewards for credit card users.
Is one better than the other?
No. Both debit and credit cards have their pros and cons, and if you have to choose, we recommend that you have both. Getting a debit card is anyway very easy, and as long as you have a stable source of income, getting a credit card doesn’t have to be hard either. When you know that your credit card will entail you more benefits, use it, or else, stick to your debit card.