Difference Between Credit Card and Debit Card - Pros & Cons
May 30, 2023
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Debit and credit cards have their own pros and cons but are also useful in different situations. A debit
card is linked to a savings account, and when you use it to make a purchase, the money is immediately
deducted from your account. On the other hand, a credit card is essentially borrowing money over a
short period of time (a month usually). When you make a purchase with a credit card, you are
essentially borrowing money from the card issuer, and you will have to pay it back with interest if you
don't pay the balance in full at the end of the billing cycle.
Let us explore the difference between credit cards and debit cards in detail.
A credit card is a financial tool that allows you to borrow money from a financial institution to pay bills and make purchases. It essentially provides you with a line of credit that you can use to make purchases up to a certain limit. Credit cards are popular and an easy way to make purchases just with a tap or swipe.
What is a Debit Card?
A debit card is a payment card linked to your bank or financial institution's checking account. When you use a debit card to make a purchase, the money is immediately deducted from your account balance, so you can only spend the amount of money in your account. Debit cards are widely accepted as a form of payment and are used to withdraw cash from ATMs. They offer a convenient and secure way to access funds for everyday financial transactions.
Debit Cards vs. Credit Cards
Credit cards and debit cards are both payment tools but operate differently. Credit card and debit card
differences are described below.
Credit cards allow you to borrow money, whereas debit cards take money from your
Credit cards charge interest on purchases if you fail to pay in full before the due date, while
debit cards do not have interest charges.
Credit cards need factors like a credit score to get one. On the other hand, a debit card can be
availed by anyone with a bank account.
Credit cards help build your credit score, while debit cards do not contribute to your credit
Both debit and credit cards have their own advantages and disadvantages. Debit cards provide you with
a convenient means to access funds. In contrast, credit cards offer rewards programs, purchase
protection, and the ability to build a credit history.
However, using both cards responsibly, avoiding overspending, and paying bills on time to avoid fees
and interest charges is important. Both cards are important, and you need to balance them both out. With a credit card, you gain the advantage of making substantial purchases, while conveniently
managing your monthly bills and EMIs, ensuring timely payments.
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