Difference between credit card and debit card
Debit card is an electronic card issued by a bank allowing its customers an access to their account to withdraw cash or pay for goods and services obtained by them. This eliminates the need for the bank customers to visit the bank to withdraw cash from their account since they can use any ATM to withdraw anytime or pay electronically at merchant locations. This type of card eliminates the need for cheques too since the debit cards spontaneously transfers money from the client’s account to the business account.
Credit card, on the other hand, is a card that authorizes the person named on it to charge the holder for the goods or services to his or her account. It differs from a debit card wherein the account holder and the beneficiary gets debited and credited respectively on the spot while in credit card, the payment is received by the beneficiary within a stipulated period.
The sole difference between a debit card and a credit card is the way the card functions and where the money comes from. Debit cards do not allow enjoying any line of credit. Whenever any purchase is made using the Debit Card, the value of purchase reflected in the bill will be reduced in the savings account connected with the debit card. But in case of credit card you receive a bill for the money you spend through the credit card. Put simply, a Debit Card let you spend your own money saved in bank account without carrying cash, while credit card let you borrow money for a short period for the products or services you buy.The purchases made with a debit card cannot exceed the balance held in the account while this is not required in case of credit card bit for limited period.
Both debit cards and credit cards are normally accepted at most of the places offering convenience to clients as well as the traders. While the credit card company charges interest on the purchases/transaction, there is not any interest charged on the transactions through debit card.
Another significant difference between credit and debit cards is the risk involved. Since they are attached to a bank account, losing a debit card poses risk especially if the holder has signed on its reverse when any unauthorized person can withdraw the entire balance in the account without the need for putting in the PIN number. In the case of a credit card, the only constraint is to establish that someone else has used the card without authority. The legal obligation that exists in credit cards is much greater than debit cards since purchases can be made even without having any balance in the account since it is unrelated to the savings account.
Credit card can put the holder into serious debt, if not used diligently besides being liable to pay some fees in case the card is lost. It also offers security on many purchases like insurance on a rental car from certain credit card providers besides building a credit history.