7 Difference between a Credit Card & a Debit Card
Both debit cards and credit cards are two popular ways of making payment. The reason they are so desired is because they are applicable almost everywhere, both in offline and online stores.
When you have a credit card or a debit card with you, you generally don’t need to carry cash. You can either pay via card or withdraw cash from ATMs. However, there is a clear difference between credit card and debit card.
To determine which suits your needs the best, let’s take a closer look into these differences and discuss how credit card interest rates are charged.
What is the Difference between Credit Card and Debit Card?
You can easily avail of a debit card and a credit card online. Credit card and debit cards, though having similar functions, operate differently. Let’s look into the following 7 major differences between them:
1. Credit Limit –
- In credit cards, there are monthly credit limits that you can’t overuse because you are borrowing funds from the issuer or the bank.
- In debit cards, there are no monthly credit limits as you are spending your own savings from your bank account.
- Funds Source –
- In credit cards, the funds are borrowed from the bank or from the issuer of the credit card.
- In debit cards, the funds come from your own savings from your bank account.
- ATM Withdrawals –
- ATM withdrawals are chargeable in the case of credit cards.
- ATM withdrawals are non-chargeable in the case of debit cards.
- Rate of Interest –
- With credit cards, you can enjoy up to 50 days of interest-free credits.
- In debit cards, there is no rate of interest at all.
- Usage –
- Credit cards can be used in all online stores and merchant outlets.
- Debit cards are not always applicable on certain online portals and websites.
- Annual Fee –
- In credit cards, the annual fees may or may not be charged.
- In debit cards, there is no annual fee charged.
- Eligibility Criteria –
- Credit cards require you to fulfill several eligibility criteria like monthly income, credit history, residential area, etc.
- Debit cards don’t require any eligibility criteria. You only need to have a bank account with a certain minimum balance in it.
Credit Card Interest Rate:
Credit card interest rates are also known as finance charges. It is a charge that is imposed by the issuer of the credit card against the credit that you have borrowed. The interest rates vary for every issuer and also depend on the type of card you’ve chosen. So, it is important for you to know about the interest rate to ensure maximum savings.
The credit card interest rate is calculated by the following formula:
Interest per month = [(Total number of days × amount of transaction × rate of interest per month × 12 months)] / 365 days
To Sum Up:
Nowadays it is relatively easy to procure a debit card or a credit card online. Do remember to comprehend a card’s working properly before choosing it for yourself. If you opt for a credit card, keep in mind the applicable interest rate. You can compare credit/debit cards from different issuers to opt for the one tailored to suit you.