What is the difference between a credit card and a debit card?
Credit cards and debit cards have many common features. They look almost the same and provide you a quick and convenient mode to make payment— it doesn’t matter whether you are paying to someone else, online or over the mobile. But both credit cards and debit cards have several key differences. And knowing those differences can support you in managing a good relationship with your finances.
Read this article to know the key differences between debit cards and credit cards and how debit and credit cards work.
What is a Debit Card?
A debit card is connected to your bank account and authorized to use the account for buying. You can use a debit card to take amounts from the bank’s ATMs and other payments.
How Do Debit Cards Work?
You can only use a debit card when your account has enough funds. If you do not keep an adequate amount in your bank account to complete purchases, the following issue can have to face:
- Transactions have been declined.
- Transactions could be approved if you have connected your debit card to a bank account; your bank or credit union may automatically transfer the amount to your savings account.
- Make sure you have sufficient amounts in your savings account for purchases.
- Try different payment methods.
- Try different debit cards for making payments.
- Transactions could be complete, but your bank or credit union may charge you an overdraft fee.
Pros of Debit Cards
There are facilities for all various payment options— including debit cards. Below are several advantages that you get while using a debit card.
- You can pay the amount you already have in your account without cash or cheque.
- You can withdraw money from any ATM, deposit some cash, transfer funds and check your account balance.
- When buying things in a mall, you can mostly get cashback as part of a cashless transaction.
Easily, one can borrow money through a debit card to make payments. Whenever you make a payment, your borrowing amount from a line of credit.
A set amount you can borrow is called a credit limit, which depends on many factors, including your credit status.
Before making your credit limit, financial institutions mostly check many factors such as your payment history and more.
Your buying adds up as you use a credit card. In the last days of the billing cycle, you get a credit card statement telling you how much you used and when your payment is due. When you pay your bill, you get back your set borrowed limit amount on your credit card.
If you pay your credit card bill before each month’s due date, you can avoid paying interest. If you do not pay your credit card bill on time, you might pay interest.
Pros of Credit Cards
Using a credit card responsibly will help you make good credit history, and you can increase your credit score. There are many advantages to having a good credit score.
Making credit is not all that credit cards are good for. Numerous benefits come while using a credit card:
- Credit cards offer flexibility, they let you take a borrowed amount now, and you can pay it later.
- You can get a lot of offers or rewards while purchasing. And it is based on the type of rewards such as cashback offers, travel or gift cards, and many more.
- Several credit cards give benefits offered by payment networks. Many cards have travel advantages such as insurance for lost luggage, traveling assistance service, and coverage for cancellation of trip and obstruction.
- A credit card statement is a good way to keep an eye on your expenses and help you make a budget.
Things to Keep in Mind With Credit Cards
Below are some points to keep in mind when you would like to use credit cards:
- If you did not pay your credit bill on time, you might be charged interest.
- There are different types of fees related to credit cards. Normally, credit card fees contain annual and late fees transactions fees like amount transfers.
- Using a credit card with irresponsibility can hurt your credit. And bad credit history might impact applications for loans such as housing loans, personal loans, employment, and many more.
Determining Whether a Debit or Credit is Right for You
Determining a credit card or debit card is based on your requirements and financial target. It is based on your condition; it could be a good opinion to have both.
If your spending is limited, then a debit card helps you make payments only what your account already has. For a debit card, you need not pay the monthly bill.
On the other side, a credit card can offer flexibility and help you get rewards on purchases. And using a credit card with responsibility help builds a good credit score, which can help you avail of loans in the future.
1. Can I use a debit card as a credit card?
Ans: If you want to pay online for something, you can usually use a debit card like a credit card. You need not define that you want to pay through a debit card ( select the “pay with credit card” option)
2. What is another name for a debit card?
Ans: A debit card, also called a bank card, plastic card, check card, and ATM card.
3. What is a full form of a Visa?
Ans: Visa stands for Visitors International Stay Admission.
4. What are the different types of cards?
Cards – There are various types of Bank Cards:
- Credit Cards
- Debit Cards
- Prepaid Cards
- Forex Cards
- Commercial Credit Cards
5. Can I have both a credit and debit card?
Ans: Yes, you take both debit and credit cards. It depends on your personal needs, and if your spending is limited, then a debit card is good for you.
6. Which is better, Visa or RuPay?
Ans: Rupay card provides only debit cards, whereas Visa provides debit and credit cards. Both provide a secure and convenient way of transactions.
7. Who made Rupay?
Ans: Rupay is a product of the National Payments Corporation of India (NPCI), and it is a body of the RBI.
8. What is the full form of CVV?
Ans: Full form of CVV is Card Verification Value. Never share this 3-digit number with anyone because this number is essential to complete transactions.