Debit Card vs Credit Card: Key Differences Explained
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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 maybe it’s about time to learn more about the debit card and credit card difference.

What is a Credit Card?

A credit card is a financial tool that allows you to borrow money from a bank or credit card issuer to make purchases. Unlike a debit card, it doesn't use your funds. You must repay the borrowed amount, often with interest, by the due date. Kotak Mahindra Bank offers credit cards with various benefits and rewards, making them a popular choice for managing expenses.

What is a Debit Card?

A debit card is a financial tool that allows you to spend money directly from your bank account. It does not involve borrowing, so there is no interest to pay. Kotak Mahindra Bank offers debit cards with benefits similar to credit cards, like reward programs and discounts. They provide a convenient way to access funds and manage day-to-day expenses without accumulating debt.

Debit Card vs Credit Card: Checkout the Difference Between Credit Card and Debit card

Choosing between debit and credit cards depends on your financial goals and spending habits. Debit cards provide the convenience of spending what you have, while credit cards offer more flexibility and opportunities to earn rewards. When managing your finances and purchasing, understanding the key differences between debit and credit cards is essential.

Kotak Mahindra Bank offers credit and debit cards with a range of benefits, but choosing the right option for your needs is crucial.

Let us learn more about the distinctions so that you can assess your needs and choose the right card for your needs:


Debit Card

Credit Card


Transactions deducted immediately from your account.

Pay later; monthly bills with minimum payments and interest.

Credit Score Impact

No impact on credit score; it's your own money.

Can impact your credit score, depending on your credit management.

Rewards and Benefits

Limited rewards, mostly cashback or discounts.

Various rewards, cashback, travel miles, and exclusive offers.

Building Credit History

Doesn't help build or improve your credit score.

Can help establish and enhance your credit history.

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 the case of a credit card, the bank holds the payment power. And as the issuing authority they thoroughly scrutinise your credit history, credit score and credit utilisation ratio among many other things before approving your credit card application.

Different Securities for Debit Card and Credit Card

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.

How Credit Card and Debit Card Transactions Work

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 an easy application and approval process, no monthly statements, no interest charged and quick 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 utilisation ratio it reflects poorly on your credit score.

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.

Frequently Asked Questions

1. How do credit cards and debit cards differ in terms of payments?

Credit cards allow you to make purchases with borrowed money, to be paid later, often with interest. Debit cards use funds directly from your bank account for immediate payments.

2. Can I overspend with a debit card like I can with a credit card?

No, you cannot overspend with a debit card since it uses funds from your bank account, limiting you to what you have available.

3. Are there interest charges with debit cards?

Typically, there are no interest charges with debit cards, as you spend your own money directly from your bank account.

4. Do credit cards and debit cards offer the same level of fraud protection?

Credit cards generally offer stronger fraud protection with zero liability for unauthorised charges. Debit cards provide protection but may involve longer resolution times.

5. Which is better for online shopping: credit card or debit card?

Credit cards are often better for online shopping due to added security, rewards, and EMI conversion options. Kotak Mahindra Bank offers credit cards with these advantages for a safer and more rewarding experience.

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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.