Credit cards and debit cards look identical. Both are plastic cards bearing 16-digit number markings inscribed with details such as expiration dates and personal identification numbers (PIN). Credit cards and debit cards are similar in more ways than one—they can be used to withdraw money from ATMs and make cashless transactions online or offline at a point-of-sale terminal.
That said, it is important to understand the differences between credit cards and debit cards. Credit cards, by definition, provide you with additional credit, while debit cards, as the name suggests, debit the amount you spend from your bank account. Thus, while credit cards allow you to borrow money up to a specific limit from the card issuer, debit cards allow cardholders to make cashless transactions by drawing on the funds already deposited in their bank accounts.
What is a debit card?
Banks issue debit cards against your current or savings accounts and you can use them to spend only the amount available in your accounts. When you swipe your debit card to make a payment or withdraw money from an ATM, the money is directly deducted from your account immediately. This could be a problem during emergencies if you do not have sufficient balance in your account to spend.
What is a credit card?
On the other hand, a credit card gives you a credit limit from where you can borrow funds to make payments as and when required. You need to pay back the borrowed amount within a stipulated time, following which the limit is restored. The credit limit depends on various factors such as your credit score, age and income. Interest is charged on the outstanding amount only in case of delayed payments. You can also get substantial reward points, cashback and discounts on movie tickets, online purchases, travel bookings and more.
When looking for the best credit card in India, you can consider the Bajaj Finserv RBL Bank credit card. It offers interest-free loans and cash withdrawal, shopping on the No Cost EMI facility, excellent rewards and benefits, along with different types of credit cards to suit your unique needs.
Is an ATM card a credit card?
An ATM card, as the name suggests, is primarily used to withdraw cash from an ATM. Such cards are generally issued by financial institutions and can be used to withdraw money from the account holder’s savings account or checking account. These are PIN-based cards, and hence, they are only used to withdraw money from ATMs.
Should I choose an ATM card or credit card?
An ATM card can only be used at ATMs and kiosks. These cards are used to withdraw cash, make deposits or perform banking-related activities, such as checking the balance amount or transferring funds between accounts. While these are also plastic cards, they only serve a single, specific purpose. On the other hand, credit cards are multi-functional and can be used to make online and offline payments, withdraw cash from ATMs or pay bills. Thus, credit cards offer greater flexibility and convenience than mono-functional ATM cards.
The fundamental difference between a debit card and a credit card is that upon using your debit card, the amount will be debited from your checking account. However, when you use a credit card, the amount will be withdrawn from your pre-approved credit limit, and not from your bank account.
You can use your debit card the same way you use your credit card for making payments at merchant stores, restaurants, and e-commerce platforms, among other places. If you are paying in person, you have to swipe your debit card on a PoS machine (or insert the card’s square smart chip), similar to how you pay with your credit card. If you’re making a payment online, you can type in your card number, along with a few other details, such as the expiration date and month, along with the CVV number.
Today, e-commerce platforms like Amazon and Flipkart let you pay for the products you purchase on EMIs by using your debit card, similar to how credit cards are used. However, your bank has to pre-approve this facility.
Additional Read: Why credit cards are better than debit cards