Credit Card vs Debit Card: What's the Difference

Credit Limit

These cards come with a pre-approved credit limit, which varies based on the card type, credit history, and relationship with the bank. This limit defines how much you can spend on credit before your account is maxed out. A higher credit limit allows for greater flexibility in managing expenses, but staying within the limit is crucial to avoid penalties and maintain a good credit score.

Debit Cards draw directly from your bank account. You can only spend up to the available balance in your account. Additionally, banks may impose a daily spending limit on your Debit Card to manage risk and prevent overdrawn accounts.

ATM Withdrawals

Withdrawing cash using a Credit Card often incurs a cash advance fee, and interest rates on these withdrawals can be significantly higher than standard credit card purchases. Cash advances also start accruing interest immediately, without any grace period, making them an expensive option compared to other methods.

Debit Cards generally do not charge fees for ATM withdrawals. However, using ATMs outside your bank’s network might be fees. Credit and Debit Cards have daily cash withdrawal limits, and some Credit Cards may also have a monthly withdrawal cap.

Interest

Credit Cards typically offer up to 50 days of interest-free credit, provided you pay your full balance by the due date. This grace period allows you to manage cash flow effectively. However, if you carry a balance beyond the due date, interest charges will apply to the remaining amount, often at high rates.

Debit Cards have no interest involved.

Annual Fees

Some Credit Cards charge an annual fee, though many offer no annual fee options. Specialised cards may have a waived fee if you meet certain spending thresholds. The annual fee structure varies widely depending on the card’s benefits and the issuer’s policies.

Generally, Debit Cards do not have annual or renewal fees.

Benefits

Credit Cards come with a wide range of benefits, including cashback on purchases, discounts on various services, and reward points that can be redeemed for flights, gifts, or other perks. These rewards and offers can enhance the value of using a Credit Card beyond its primary function of making purchases.

Debit Card benefits are generally less extensive compared to Credit Cards.

Usage

Credit and Debit Cards can be used interchangeably for most merchant transactions and online purchases. However, certain transactions or websites may only accept Credit Cards due to security measures or payment processing preferences.

Eligibility

Eligibility for Credit Cards typically depends on your income level, existing credit relationships, and creditworthiness. Banks evaluate these factors to determine your suitability for various Credit Card types and their associated credit limits.

Obtaining a Debit Card is relatively straightforward if you hold a savings or current account with a bank.

Security Features

Both Credit and Debit Cards feature essential security measures such as SMS notifications, PINs, and transaction OTPs. Many Credit Cards also offer zero liability insurance for lost or stolen cards, providing additional protection against fraud and unauthorised use.

Debit Cards include security features like SMS alerts and PINs. However, they often lack the zero-liability insurance provided by Credit Cards, which can offer more robust protection against theft and fraud.

Are you looking to apply for an HDFC Bank Credit Card? Click here to learn more!

* Terms & conditions apply. Credit Card approvals are at the sole discretion of HDFC Bank Ltd