Credit Cards vs. Debit Cards

Debit cards are extremely useful and convenient as it relieves us from the stress of carrying a cash heavy wallet, a cheque book, and yet gives us the freedom to have free access to your money through ATM’s and swiping the card at merchant outlets instead of paying by cash. Linked to the cardholders bank account, debit cards are ideal for quick and hassle-free usage.

As soon as you charge a purchase (online or offline) to your debit card (by swiping it or feeding in the card details online) the same amount gets debited from your bank account. You also receive SMS and email alerts for the same to help you keep a track of your spendings. These alerts also depend on the services provided by your card/issuing bank.

Credit cards on the other hand function differently. It is more like offering you a line of credit. In simple words it is more like you getting a loan, i.e to need to buy/spend on something this month and don’t have the cash to do so, hence you charge that spending to your credit card (without having to pay money from your wallet or account at that very moment. But the same amount is charged to your credit card bill generated the next month and that is when you have to pay that amount from your own pocket. Failing to pay your credit card bill on time leads to interest accumulation, late payment fee and bad credit score.

While a debit card is linked to your bank account, credit card is linked to the bank which has issued you the card. When you use your credit card for a transaction, technically at that time the bank is paying for it and you become debted to the bank to clear that amount whenever the bill is generated.

Most users feel that debit card is not only more convenient, but less stressful as it lets you spend within your financial abilities without accumulating and debt or interest in future. It relieves you from a lot of stress, from getting into a debt cycle and overspending. Using a credit card is tempting because you can spend a lot more than you have the cash for, but the flipside is that you end up being under the burden of clearing up the debt/loan eventually. Also, there are a lot of places in India which accept payments only in cash and debit card enables you to withdraw cash conveniently from ATMs.

There is a comprehensive table provided below which summarises the primary difference points between credit cards and debit cards –

Feature	Credit Cards	Debit Cards
Bill every month	Generated every month	No bill generated. Account statement generated instead.
Linked to	The issuing bank or financial organisation	The cardholder’s bank account.
Credit limit/spending limit	Credit limit assigned on a monthly basis.	Cash withdrawal and POS limit assigned on a daily basis. Some debit cards do not have that limit.
Interest charged	Only if you haven’t cleared you bill on time	As no amount is borrowed hence interest is not charged
Credit score	If you are consistently failing to clear your bill within the due date, it affects your credit score negatively. Please use the card responsibly to avoid the same.	As no credit is taken, hence no question of credit score.

In terms of security a lot of people think that it is more secure to use a debit card than a credit card. They believe that a debit card offers enhanced security in comparison to a credit card. It is true that a credit card does come in greatly handy during times of emergency, when we need to spend on say flight tickets or medical purposes but do not have that amount of cash at our disposal that very moment. There is a huge flipside to the same being, that the card comes with the temptation of overspending and getting into the vicious circle of debt.