Credit Cards: Difference between Credit Cards and Debit Cards.

Credit Cards: Difference between Credit Cards and Debit Cards.

Ever wondered what a credit card is, How credit Cards work, the difference between Credit Cards and Debit Cards. All this and lots more will be discussed in this post

A credit card is a physical card that can be used to make purchases, pay bills or depending on the card, withdraw cash. The simplest way to think of a credit card is as a type of short-term loan.

What Is a Credit Card?

A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company that allows cardholders to borrow funds to pay for goods and services from merchants who accept credit cards. Credit cards require cardholders to repay the borrowed funds, plus any applicable interest, as well as any additional agreed-upon charges, in full by the billing date or over time.

How do Credit Card Works?

A credit card is a type of payment card that is issued by a bank or financial services business that allows cardholders to borrow funds to pay for products and services at merchants who accept credit cards. Credit cards require cardholders to repay the borrowed cash in full by the billing date or over time, plus any applicable interest and any other agreed-upon charges.

In comparison to other types of consumer loans, credit cards often have a higher annual percentage rate (APR). Unless previous unpaid balances were carried forward from a previous month—in which case no grace period is granted for new charges—interest charges on any unpaid balances charged to the card are typically imposed approximately one month after a purchase is made (except in cases where there is a 0% APR introductory offer in place for an initial period of time after account opening).

When a Credit Card is used to make payment online in a store or Upon making a payment, Once the transaction is approved, the payment is made to the merchant, and your card’s available credit is reduced by the transaction amount. At the end of your billing cycle, your card issuer will send you a statement showing all the transactions for that month, your previous balance and new balance, your minimum payment due, and your due date.


Choosing the right Credit Card

It’s critical to conduct some critical comparisons when selecting your first credit card or your next credit card. When comparing credit cards, below are features you must look out for :

  • Regular variable APR for purchases
  • APR for balance transfers and cash advances
  • Promotional APR terms and conditions
  • Annual fees
  • Rewards programs
  • Introductory bonus offer terms

Credit Card vs Debit Card

Difference between a Credit Cards and Debit Card

Have you ever had trouble distinguishing between a credit and a debit card? It’s simple to understand why. A lot of places accept both debit and credit cards. They provide convenience while also removing the need to carry cash. They even have the same appearance.

They may look alike, but debit and credit cards work differently. Before we go into the difference between credit cards and Debit Cards, let’s see what each of them stands for.

What is a debit card?

A debit card is a payment method that can be used as an alternative to cash. There are two major types of cards that you might see referred to as debit cards — bank debit cards, which you can get when you open a debit account, and prepaid cards. Though prepaid cards are not strictly debit cards, so they may not work or be treated the same way.

You will have a personal identification number (PIN) to use with your debit card at stores or ATMs. However, you can also use your debit card without a PIN at most merchants. You will sign the receipt like you would with a credit card.

A few advantages of using Debit cards-

  • You won’t pay interest on your purchases.
  • Your credit history will be unaffected by debit card spending.
  • Paying with debit will take the money from your account pretty much immediately.

Pros of debit cards

Like the thought of not having to go to the bank or ATM every time you want to make a purchase? Debit cards provide a number of advantages in addition to ease.

  • A debit card can help you keep your spending in check since you usually need the money available in your bank account if you want to use the card to pay for things.
  • You can set up alerts to monitor debit card activity.
  • You won’t pay interest on your purchases.
  • You can use your debit card to withdraw cash from ATMs or to get cashback at a point of sale when you make a purchase.

Cons of debit cards

While there are many advantages to having a debit card, there are a few things to be aware of.

  • It’s possible that you’ll have to pay a fee. Out-of-network ATM fees, overdraft fees, and fees for using a PIN during transactions are all common expenditures with debit cards from banks or credit unions. If you have a prepaid card, you may be charged fees to activate it, add money to it, check your balance, withdraw money from an ATM, and other services.
  • Using a debit card won’t help you build your credit history, which is one of the things that help you improve your credit scores.
  • You may be liable for fraudulent charges on your debit card. The Electronic Fund Transfer Act limits your responsibility for unauthorized charges if your debit card is lost or stolen and you report it within two business days of learning about the loss or theft. But if you wait too long, you could be on the hook for some or all of the charges.
  • Prepaid cards are not debit cards, despite the fact that they are commonly referred to as such. As a result, they won’t have the same safeguards as a genuine debit card – but the Consumer Financial Protection Bureau recently issued a regulation aimed at improving prepaid card consumer protections, including in the case your card is lost or stolen. For the time being, if you want some safeguards, make sure the prepaid card you acquire has limited liability by reading the terms and conditions and completing the consumer identification and verification process.

What is a credit card?

A credit card gives you access to a line of credit that you may use to make purchases. Cash advances and debt transfers are available on many credit cards. You agree to return the credit card company the amount borrowed, plus any interest charges, when you use your card.

You use the card to make simple purchases that appear on your statement; the bank pays the merchant, and you pay the bank when you get your bill.

Your purchases will be subject to interest charges. To prevent paying interest, don’t carry a balance from month to month. Credit cards have high interest rates, and the balance on your card and your payment history affect your credit score.


  • Credit cards are extremely convenient and prevent you from having to carry cash with you.
  • Credit cards help you build your credit score.
  • The rewards you earn are much higher than those on debit cards.
  • They provide you with flexibility when it comes to spending since they come with relatively high credit limits.


  • If you don’t pay your bills on time or in full, you are charged a high rate of interest.
  • Credit cards have multiple fees.
  • Missing a payment (even due to genuine reasons) could end up adversely affecting your credit score. You then must work much harder to build it.
  • While there is a credit limit, you could always be tempted to spend more than what you have. This leads to debt.

Credit Cards vs Debit Cards

When you use a credit card to make purchases, you’re effectively borrowing money. Interest accrues on any sum not paid back during the billing month and must be paid. A bank account is connected to a debit card. When you use your debit card to make a purchase, the funds are promptly taken from your account as soon as the transaction is completed.

Below is a table showing the difference between credit card and Debit Card;

Credit card Debit card
Borrow money to make purchases and repay it later Money deducted from your bank account to pay for purchases
Can help build your credit history Won’t help build your credit history
Likely charged interest if you don’t pay your bill in full every month by the due date No interest charges
Can be used to make purchases even if you don’t have cash on hand Typically need money in your bank account to make purchases
Fees include late, return payment, balance transfer, cash advance, and/or foreign transaction fees Fees include overdraft and out-of-network ATM fees, as well as fees for using your PIN during transactions
Liability for fraudulent purchases is limited You could be liable for fraudulent purchases

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