What is the Difference between Debit and Credit Card
Money was once the “metal coins” and then “paper” and with the passage of time it become virtual. Virtual means that there is now a convenience of not carrying cash during travel or when you are on shopping or when you make heavy monetary transactions or deals. This became possible when the banks introduced the credit and debit cards for their customers. These two types of financial instruments are now widely used and many people like to carry them instead of cash in their pockets.
Debit Cards
Debit cards are the financial instruments that enable its users to draw the money from their running bank accounts when they make monetary deals. The user of the debit card makes purchases and pays through this card instead of direct cash. The transfer of the money becomes virtual. The purchaser’s account is debited for that certain amount for which he made purchases and the seller gets the same amount credited to his account. This makes the deal safe and sound.
Credit Cards
Credit cards are financial instruments that enable the user to do the purchases on certain limited amount enabled by the bank for that particular user. It works this way: the user gets certain limited permissible amount to be used and to credit it later in his bank account within 30 days or after thirty days the amount is charged with interest. This interest could be certain fix percentage as per the bank rules. Money remains virtual even in this case.
Debit vs Credit Cards
Debit card extract money from the user’s account while credit card extracts money from bank. Debit card holders don’t have to pay interest on their purchases but on each transaction a certain amount is deducted from their bank balance as a fee for using the instrument while credit cards facilitate the users to buy even if they don’t have enough cash available in their bank accounts. Debit cards are risk free for the bank while credit cards are not because when bank allows users to get the credit it has less surety of getting the amount back at due time. In debit cards, banks cannot charge interest rates for the amount used by the user as the user uses his own money while in credit cards, bank has the chances of earning interest money as well.
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