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Difference Between Credit Cards And Debit Cards – An Analogy

Difference Between Credit Cards And Debit Cards

In 1966 when the debit card was introduced in India, it was revolutionary. People could pay, shop, and travel without worrying about carrying bundles of cash with them. Owning a debit card was a luxury in those days, and not everybody was eligible for it. Cut to the present time, having a credit and debit card is a necessity. Most countries like the UK have stopped accepting cash payments, and only accept cards or online payments. Even though people know the use of these cards, sometimes their usage can get confusing. In this blog, we will understand the difference between credit cards and debit cards, but first, let’s understand the basic concepts.  

What Is The Difference Between Debit And Credit?

Debit (dr) and credit (cr) monitor the inflow and outflow of money in your account. In simple terms, debits record all the money flowing into your account and credits record all the money flowing out of your account. This forms the basis of all transactions we do in cash or in kind. Let’s understand this with an example. When a company pays your salary, it will be an inflow of money, a debit entry. On the other hand, an expense incurred for dinner with friends will be an outflow of cash, a credit entry. This is the basic difference between debit and credit. 

Now, let’s look at the difference between credit cards and debit cards. 

Difference between credit cards and debit cards 

Debit and credit cards look very identical, they have similar physical features, like the 16-digit pin, CVV, allows for cashless and online transactions, works in ATMs, etc. But when it comes to their usage, there is a lot of difference in both cards. 

Usage: The major difference between credit cards and debit cards is that on a credit card, the bank lends you money to spend, whereas on a debit card you spend the money that is existing in your bank account. So in a debit card, the source of funds is your current or saving account, and in a credit card, the bank provides you money which is not yours, like a short-term loan. 

Spend Limit: When you have a debit card you know your spend limit, whereas if you have a credit card you can spend more than what you have in your bank. A credit card grants you the freedom to spend and meet your necessary expenses. 

Charges: The price paid for the cards is another difference between credit cards and debit cards. Banks have made debit cards completely free of charge. Only in case of loss of card, you will have to pay a nominal renewal fee. When a bank issue a no-frills credit card, it has no charges, a restricted credit limit, and not many additional benefits. For any premium credit card, the bank charges a nominal registration and annual fee depending on the benefits it is giving to the customer. 

Penalty: The most noteworthy difference between credit cards and debit cards is penalty charges. While in a debit card there is no concept of penalty as you are paying from the money you have in your account. On the other hand, in a credit card, if you fail to pay within the stipulated time, the bank can levy heavy penalties on per day basis till the time you settle your payment. Keeping a track of your due date is the most important thing you must know before owning a credit card. Most people forget their payment due dates and end up paying a heavy amount during bill payments. 

Rewards & Benefits: Both credit and debit cards have their set of benefits. Most credit cards have more benefits and rewards than debit cards. You will find that generally on e-commerce websites or during the sale period, there are more offers on credit cards. Another difference between credit cards and debit cards is that in credit cards you get an option to convert your payment into a no-cost EMI; which means you can pay your dues in instalments, and not all at once at the end of the month. Banks are constantly thinking of ways to add more schemes and benefits to their credit cards to make them lucrative and attractive to their customers. 


Lastly, the difference between credit cards and debit cards is only restricted to the use of each card. In today’s time the more cards you own, the more benefits and rewards you will enjoy. Hence it’s good to have both cards handy with you. In some situations when you have to make urgent payments, and you have exhausted your credit card limit, a debit card comes very handy and acts like your best friend. Whereas in some situations when you want to make an important purchase, but have insufficient cash balance, using a credit card is beneficial.


1. Are Debit Cards the same as Credit Cards?

Credit cards and debit cards differ significantly even though they may have a similar appearance and share a few features. The primary distinction is that debit cards are connected to bank accounts and take money straight out of those accounts (similar to a check). On the other hand, a credit card does not draw money right away and must be paid back later, subject to any interest charges that may have accrued.

2. Is a Credit Card safer than a Debit Card?

Compared to debit cards, credit cards often provide consumers with more security against fraudulent purchases. Debit card transactions might not be as easily or liberally covered by these fraud precautions.

3. Which is better: A Debit card or Credit card?

Both debit and credit cards have their share of benefits and drawbacks. Where the money comes from and the maximum amount you may use on a debit card vs a credit card are the main differences between the two. It is advisable to conduct research depending on your requirements before making a decision.

4. Is there a fee for using Debit cards?

Debit cards have a minimal fee linked to them. However, most debit cards do not include any form of usage fee. Premium debit cards, such as the Platinum card, may impose a fee.

Thank you for reading this blog on ‘Difference Between Credit Cards And Debit Cards – An Analogy!’ If you’d like to read more, here are some blogs that may be of interest to you –  

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Difference Between Credit Cards And Debit Cards

Difference Between Credit Cards And Debit Cards – An Analogy

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