What is the difference between a credit card and debit card?

A credit card allows you to make purchases and pay them later. Using a credit card is a form of loaning or borrowing money from a bank or financial institution. The bank or financial institution that issued you the credit card settles the debt with the store or vendor where you made the purchase, and you settle your debt with the bank or financial institution and pay whatever interest was incurred.

A debit card allows you direct access to the funds you have in your bank account. It is directly linked to your bank account and every time you use a debit card, you are taking funds directly from your account. A debit card is much like a check, only the process is faster.

Both a credit card and a debit card are used similarly in stores where they are “swiped” when you make a purchase. When you use a credit card, you are required to sign on the receipt and most of the time you are asked to show a valid ID card with your picture. You also have the option to sign the receipt when you use your debit card and most of the time you are required to input your PIN number when you make a purchase with your debit card. Credit cards and debit cards also allow you to make cash withdrawals from ATMs that are within their specific networks.

Credit cards and debit cards have their advantages and disadvantages. Debit cards are convenient, but can be more prone to fraud than credit cards which have more stringent security measures. Although credit cards have interest rates and charges for late payments, credit cards allow users to avail of their loan facilities for big ticket items and this can help people manage their expenses. Credit cards also have fixed credit limits and can also help you track your expenses. Debit cards are directly linked to your funds so there is always the risk of spending all your money.