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Wondering what is the difference between debit card and credit card? Find out in this article.
Banking transactions are easy and convenient today, thanks to debit and credit cards. With debit cards, the bank debits the money from your linked account when you make a transaction. However, with credit cards, the bank adds the transaction amount to your line of credit and sends you a bill at a later date, giving you plenty of time to make the payment. While the two types of bank cards look the same, there are quite a few significant differences between a debit card and a credit card. Let us learn more about them, starting with their meanings.
Before comparing features, it is important to look at the credit card and debit card definition, as both serve different purposes in managing payments.
A debit card is a plastic card that gives you instant access to the funds in your account. Typically, banks provide you with an ATM-cum-debit card to withdraw money at ATMs. You can just as easily use the card to pay for purchases at brick-and-mortar stores or buy products online. Your bank issues you a debit card when you open bank account online or at a branch, and the card is linked directly to your account.
Debit cards offer a convenient way to access your bank funds without carrying cash. Understanding the features of debit card can help you manage money effectively.
You can start using these benefits immediately by choosing to open bank account online with a trusted bank.
Using a debit card comes with several benefits that make managing your finances easier and more secure. Knowing the advantages of debit card can help you make informed choices for everyday spending.
Understanding the difference between debit card and credit card can further help you decide which option suits your financial needs.
While debit cards are widely used and very convenient, it is helpful to also understand the disadvantages of debit card usage when compared with credit cards:
A credit card has a 16-digit card number, expiry date, CVV, and signature strip. It allows you to borrow funds from the issuing bank for a short period, usually 30 to 45 days. The bank pays the merchant, and you repay the billed amount by the due date, either in full or in part, with interest on any balance. Unlike debit cards, credit cards are not directly linked to your bank account.
Before choosing one, it is important to know the key features of credit card that make it different from a debit card.
The main advantages of credit card use go beyond convenience, offering financial flexibility and added benefits.
Let us now understand what the difference between a debit card and credit card is.
Technically, debit cards cannot be used as credit cards since the two cards function differently. With the former, money is debited from your card instantly upon making a payment, whereas with the latter, funds are not debited from your account until the credit repayment date. However, you can use your debit card to pay off your credit card bills.
Debit cards are ideal for everyday expenses and controlled spending. Use a debit card when paying for groceries, fuel, utility bills, or dining out, as the money is deducted directly from your account. They are also suitable for small online purchases or subscriptions where you want to avoid borrowing. For example, paying for a grocery shopping trip or topping up your mobile recharge are convenient uses of a debit card.
Credit cards are best when you want short-term borrowing, rewards, or enhanced security. Use a credit card for larger purchases, travel bookings, or online shopping on international platforms. They are useful for situations where you need to pay later or spread payments through EMIs. For instance, booking a flight ticket, purchasing electronics, or paying for a hotel stay can be more convenient and rewarding with a credit card.
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While using both debit and credit cards at retail stores, you need to enter your PIN (Personal Identification Number) to complete the transaction. For online payments using credit vs debit cards, you have to enter the entire 16-digit card number, expiry date and CVV. In addition, you also need to input the OTP (One Time Password) sent by the bank or creditor to your registered mobile number to authenticate the transaction. Once you enter the PIN/OTP, the credit or debit transaction will be completed.
Once you learn the difference between debit cards and credit cards, you can make an informed decision about the right kind of card that works for you. Be it visiting your favourite restaurants or shopping centres or making online purchases, you can do it all with these cards, and without withdrawing cash from your account. Both cards can prove to be extremely helpful in different situations. So reach out to your bank and apply for both.
With the digibank by DBS app, you can open bank account in just a few minutes and start enjoying convenient banking right away. Download the app to begin.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.
