Even the most unversed consumers have at some point heard the terms debit card and credit card. But did you know, these similar looking instruments are actually quite different and have completely different uses? So if you are unsure about when to swipe your debit card and when to use your credit card, then may be it’s about time to learn more about the credit card and debit card difference.

A debit card swipe deducts money from your existing savings account. Whereas a credit card payment is a type of loan that your card-issuing bank advances to you for your purchases, and which you must repay eventually as per your payment cycle. This is the most crucial credit and debit difference.

Debit cards are like modern-day digital cheque books as they are linked with your current or savings account. And because you use the money from these accounts to carry out debit card transactions, only a limited amount existing in your bank account is available to you. In case of an overdraft facility, the limit of the overdraft will be the amount available.

As opposed to this, credit cards are not linked with your checking account. Instead, when you swipe a credit card for any financial transaction, it is the card-issuing bank that pays on your behalf. And if you fail to repay this borrowed amount to the bank, they can slap you with a hefty interest bill.

Apart from this, here are some other important differences between debit card and credit card:

Periodic statements

One of the most important debit card and credit card differences is the monthly bill. With a debit card, no monthly statements are generated. The bank only charges you a small fee for using the debit card. But in case of a credit card, a monthly bill is generated and you have to repay this amount as per your billing cycle.

Ease of getting a debit card vs credit card

A key difference between credit and debit card is, obtaining a debit card is simpler than getting a credit card. If you have a bank account, a debit card can be issued to you. But in case of a credit card, the bank holds the payment power. And as the issuing authority they thoroughly scrutinize your credit history, credit score and credit utilization ratio among many other things before approving your credit card application.

Different securities

A credit card is more secure as the issuing bank decides the credit line and has an insurance policy in place against any fraudulent transactions. But a debit card has minimal protection without any secondary party to cover the card security. That’s another prime difference between debit and credit card.

How do debit cards and credit cards work?

Opening a savings or current account is mandatory to apply for a debit card as these two have to be linked. Once your debit card request is approved and you receive the debit card you can enjoy easy cashless transactions such as shopping, bill payment and even for cash withdrawals at ATMs.

For a credit card, the applicant gets a credit line from the bank, which means they can treat it like a short-term loan. Once their credit card request is approved by the bank, post assessment of credit history and financial stability, the applicant can use the card to shop, for a vacation, educational courses, health emergencies and much more.

Here’s how the cards work offline

  • Once you head to make the payment, the card is swiped or tapped on the point-of-sale machine.
  • If the card is swiped, you have to feed in your personal identification number (PIN), which sends the purchase details to the bank.
  • After the bank verifies the details - like if the item is within the credit limit or the account has sufficient funds to process the transaction, it accepts the order and issues the payment from your account in case of debit card and deducts the money from your credit limit in case of a credit card.
  • You receive a payment slip from the seller to keep a track record of your expenses on the card.

But online transactions work differently

While doing online transactions, the websites will ask for the following details when it comes to payment matters

  • Choosing the card type - Visa or Mastercard
  • 16-digit card number
  • Expiration date
  • CVV
  • Name as it appears on the card
  • Address for billing
  • After adding these details, you are directed to the payment gateway where the OTP gets generated and is sent to the registered mobile number to authenticate the transaction. Once the OTP is provided, the transaction is completed.

However, herein lies the difference between credit cards and debit cards.

  • One is liable to pay interest on a credit card as the bank loans you the money temporarily.
  • If you happen to exceed the credit limit on your credit card you have a penalty in the form of an overlimit fee.
  • Your billing cycle is the time period till when you can make your purchases on credit. Post that, you are bound to make the payments, which can either be the full amount or minimum amount payable. Interest charges are applicable on the balance due, in case of minimum payment. The balance implies the amount which has been spent but not cleared by you.
  • While having a credit card can help you create a good credit score on the basis of timely payments, a debit card doesn’t give you that opportunity as your accounts are not disclosed to any credit agencies.

Pros and Cons of Debit Cards and Credit Cards

Both debit and credit cards have benefits as well as disadvantages.

The plus points of a debit card include easy application and approval process, no monthly statements, no interest is charged and easy cash withdrawals at ATMs. But when it comes to emergency or loan requirements and security of transactions, debit cards fall short.

On the other hand, a credit card allows you to make financial transactions without worrying about your existing funds. And that’s why they are the best to use in case of financial emergencies. Apart from this credit cards help improve your credit score further increasing your chances of obtaining a loan if you should need one. They are also useful as you can earn travel rewards and cashback offers upon spending. Most importantly, they provide far better security compared to debit cards.

Flipside: relying on credit cards heavily can create a financial dent. If you end up exceeding your credit limit you end up paying heavy charges. You can even get caught in a massive debt cycle if you don’t clear your dues in time. Moreover, if you have a high credit utilization ratio it reflects poorly on your credit score.

Can debit cards be used as credit cards?

The basic difference between credit cards and debit cards does not allow you to use debit cards and credit cards. While credit cards are debt instruments, debit cards are non-debt instruments. Debit cards don’t provide you with a credit line or a chance to pay the bills later. So, they cannot be used as credit cards.

Which is better - credit card or debit card?

Whether you want money from your account to be used up now or later is the determining factor here. If you are someone who requires large sums of money and has the capacity to pay it off in time, you can opt for a credit card. However, if you are not too strong financially and don’t want to get caught up in the cycle of overspending, you can play it safe with a debit card. Both these cards have their own benefits and drawbacks.

Now that you have understood how debit cards and credit cards are different, you can use them effectively to enjoy your much-deserved financial freedom, albeit with a little bit of caution.

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Frequently Asked Questions


Can I transfer money from my credit card to another account?


 You can transfer money from your credit card to another account with netbanking, money transfer credit card, placing request via phone call or digital payment methods to make a direct transfer. If a direct transfer is restricted, you can opt for ATM cash advances in your bank account through your credit card or paying ‘cheque to self’.

What is the coverage scope of CPP membership in India

The coverage under CPP credit card protection membership in India is generally limited to the protection against loss, theft or misuse of the member's credit cards, debit cards, and other cards. CCP credit card protection also protects unauthorized transactions and emergency card replacement services.

Is a Credit card protection plan mandatory?

Protection plans for credit card fraud protection are optional. However, if your cards are ever lost or stolen, this is a great method to feel more secure and at ease. A wide variety of benefits, including monitoring for fraudulent activity, compensation for losses, and new cards in the event of theft, are available through plans of this sort.

How can I tell the difference between a debit card and a credit card?

Credit cards are debt instruments. Debit cards are not. 

The basic difference is - a credit card allows you to pay at a later date for your purchases, but a debit card deducts the money from your account linked with the bank to make the payment. 

Can I cancel my credit card protection plan?

You must contact the bank's customer service to terminate the credit card fraud protection Plan. You must call from the cell phone number associated with your account. If you don't, your request can get stuck in limbo. This precaution should be taken before making the call.

Can I earn reward points on debit cards?

Debit cards provide you the opportunity to earn rewards, withdraw cash, shop online or offline, pay bills and much more.

Different debit cards come with different reward points. This makes it interesting for the customer as they enjoy the benefit of earning rewards while spending the funds in their accounts.

Is it better to use a debit card or credit card for certain transactions?

Credit cards should be used when you have insufficient funds and require a loan to make the purchase.

Whereas debit cards should be used when you have sufficient money in your savings account for a successful financial transaction.

Are there any limits on the amount that can be withdrawn using a debit card?


As the debit card is connected or linked with your savings or current account, the funds in these accounts is what is available for use. Apart from this, debit cards may have a daily or monthly cash withdrawal limit as well, which depends on your account type.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.