Credit cards and debit cards are used for multiple purposes to fulfill our daily needs without paying cash by hand. Credit cards and debit may look simply but there are some differences between them. Before jumping into the differences, we must know what is credit/ debit cards and how they operate. In this article, we will learn about these things.
Credit cards are metallic or plastic like cards used to make the payments from it. The credit cards allow the user to pay the price without paying on cash. Credit cards are issue by the banks, finance department and other industries. The credit cards really help users to allow them to pay without carry the cash with them, just swipe the card, enter the PIN and amount you want to pay. The amount will directly pay from the bank to the account of retailer or service provider.
Credit cards is directly linked with the bank account, the banks will pay the amount on the behalf of card holder. The card holder will have to return the amount before the final date of payment. Otherwise, the banks will charge some high interest fee as a fine. The card holder must know the last day for the payment of dues and credit card limit.
Types of Credit cards
Multiple credit cards are operating in the market ie VISA, Mastercard, and American Express. Some cards are also issue by a specific retailer such as any shopping mall for the customers to pay cash through credit cards. Credit cards also give some reward if you make a payment through them. Secured credit cards are those in which the customer has to pay or submit the money in the bank and then he/she can use the credit cards.
But how do Banks evaluate the customers whether to issue the card or not? Well, there are certain factors involved in the verifications like salary or income, credit card history, and ability to pay the dues on time. Banks will issue cards to only those who will fall under their secure section otherwise, banks will give low credit against the card or even no credit cards for such customers.
Advantages of Credit cards
- With credit cards, you can do payments without carrying the actual money.
- Some credit cards will give you rewards, by collecting the rewards on every transaction you can do anything depending upon the reward offered by the banks.
- There is no risk to use credit cards.
Disadvantages of Credit cards
- Cardholders have to pay the interest.
- Credit history can also have a negative impact on the customer.
- If the customer is unable to pay the dues, he/she can fall into great debt.
Debit cards are the cards issued by the banks and the customers make the payment through them. The main work of debit cards is to pay the price of anything. Debit cards work as same as credit cards, but unlike credit cards, debit cards hold the money in the bank account and payments are made through the bank.
When the cardholder makes the payment money from the customer’s bank account shifts to the service provider account or anyone. With debit cards, you make the actual payment just according to the money your bank account holds.
Advantages of Debit cards
- No annual fee on a debit card.
- No risk in the usage of debit cards.
- Cardholders can easily avoid the debt he/she can check the balance in the account.
Disadvantages of Debit cards
- No rewards for debit card holders.
- There will be no issue with credit history.
- No hidden fees or any interest.
Difference between Credit card or Debit card
|The money usage is issued by the bank which you to repay before the due date.
|Money is deducted directly from your bank account.
|Have reward system
|No reward system.
|No interest charges.
|Can fall under the debt.
|No debt risk.