There are mainly two types of banking cards. One is a debit card and another is a credit card. It is possible to be confused by these two cards and not know which one to take or which one is suitable for you. So, let’s discuss the difference between credit card and debit card and how the credit card interest rate is charged.
What is a Credit Card?
A credit card is a type of banking card. Its basic principle is “buy now, pay later”. It allows you to spend more than what you have in your bank account. This system lets you borrow credits from the bank that you need to pay back later. Every credit card has its credit limit and you can borrow up to that limit. But if you overuse it, then it won’t be valid. The credit card limit depends on various factors like your credit history, credit score, credit points, age, income, etc.
What is a Debit Card?
A debit card is a banking card that is issued for your savings account. It lets you use the funds from your savings accounts without the trouble of carrying cash everywhere. You can use these cards at ATMs, on any store’s POS machines, or can use them for online shopping. Once the payment is done, the amount that you spent will be deducted from your savings accounts. So, with a debit card, you always have to be cautious of how and where you are using the money.
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Difference Between Credit Card and Debit Card
Both debit cards and credit cards are trusted and used as payment methods. This is because fast transactions are offered by both debit and credit cards. Apply online or offline, it is easily available. However, there are certain differences among them and they are as follows:
| Debit Card | Credit Card | |
| Credit Limit | No Credit Limit | Monthly credit limit imposed |
| Source of Funds | Your own savings | Funds from the credit card bank or issuer |
| ATM Withdrawals | Non-chargeable ATM withdrawals | Chargeable ATM withdrawals |
| Interest Rate | No interests charged | Interest-free up to 50 days |
| Annual Fees | No annual fees charged | Annual fees may be or may not be charged |
| Usage | It is not applicable on some online portals | Applicable almost everywhere from offline merchants to online stores |
| Eligibility criteria | Only a certain amount is required in the savings account | Many different factors like monthly income, credit history, residential area, etc. |
| Security | No zero liability insurance policy is available | Zero liability insurance policy available on certain cards |
Credit Card Interest Rate
Although you can buy things on credit borrowed by the bank or issuer, after a certain period you have to pay it back. However, when you pay it back, you have to pay a certain percentage of interest. This credit card interest rate varies. Interest rates on credit cards generally range between 2.5% to 3.5% per month. But these rates also vary for every issuer and from one card to another.
Wrapping Up
Although quite different from one another, fast transactions are offered by both debit and credit cards. Credit Cards apply online or offline, it is conveniently available. Knowing the difference between them, you can now easily choose which one is the most suitable for you. If you are going for a credit card then remember to compare interest rates.
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