Debit Card vs. Credit Card: Key Differences 1. Source of Funds Debit Card: When you use a debit card, the money is immediately deducted from your linked bank account. You can only spend the amount you have in your account or within an overdraft limit if applicable. It’s like using your own money. Credit Card: When you use a credit card, you are borrowing money from the issuing bank up to a pre-approved limit. You pay the bank later, either in full or in installments, sometimes with interest. 2. Ownership and Liability Debit Card: The cardholder owns the money; it’s directly their account. If there is unauthorized use, banks usually investigate, and the liability may be limited or transferred based on RBI’s “fraud liability” guidelines. Credit Card: The cardholder owes the bank money. Liability for fraud or misuse is subject to different rules, often defined under the Indian Contract Act and RBI guidelines on electronic payments and customer protection. The cardholder is liable for unauthorized transactions unless reported promptly. 3. Credit Facility Debit Card: No credit facility. Spending is limited to the available balance. Credit Card: Offers a revolving credit facility, allowing the user to borrow up to a certain limit and repay later. 4. Interest and Charges Debit Card: No interest charges since it’s your own money. Banks may charge fees for specific services like ATM withdrawals beyond a limit. Credit Card: Interest is charged on unpaid balances after the due date. Additionally, there may be annual fees, late payment fees, and other service charges as per the terms and conditions. 5. Regulatory Framework Debit Card: Governed by the RBI’s guidelines on prepaid instruments and electronic payments under the Payment and Settlement Systems Act, 2007, along with the Banking Regulation Act. Customer protection is outlined under RBI’s Master Directions on digital payments. Credit Card: Governed by RBI regulations, including the Credit Information Companies (Regulation) Act, 2005 (related to credit reporting), and the Indian Contract Act for credit agreements. Also, RBI Master Directions set norms for fair practices in credit card issuance and usage. 6. Impact on Credit Score Debit Card: Does not impact your credit score as it does not involve borrowing. Credit Card: Usage affects your credit score, maintained by credit bureaus under the Credit Information Companies (Regulation) Act. Timely payments improve the score; defaults harm it. 7. Purpose and Usage Debit Card: Used mainly for day-to-day transactions and direct payments, including ATM withdrawals, online shopping, and POS payments. It encourages spending within means. Credit Card: Often used for bigger purchases, emergencies, rewards, and building credit history. Also provides benefits like cashback, reward points, and offers, which are governed by specific agreements between cardholders and banks. Summary: A debit card lets you spend money you already have in your bank account, with immediate deduction. It’s safe, limits overspending, and comes under RBI’s digital payment protections. A credit card allows you to borrow money from a bank up to a limit, repay later with possible interest. It’s regulated by RBI’s credit norms and affects your credit rating. Credit cards carry higher risks and benefits.

Dear Client, The basic function of both a debit card and a credit card is to make payments, but they work differently. When you use a debit card to make a purchase, the amount you have to pay is deducted from your bank account because your debit card is directly linked to your bank account. The payable amount is deducted from the money you already have in your bank account, so there is borrowing of any kind involved. A debit card is usually used for purchases involving small amounts when an individual wants to spend what they already own and not borrow money from the bank to make a purchase. On the other hand, a credit card allows an individual to borrow money from the bank, but only to a certain limit. A credit card works in this way – you make purchases at the present with the bank’s money and later, you pay it off when your monthly credit card bill arrives. In case you fail to repay the bill within the prescribed time, the bank may charge you interest and penalties. Using a credit card can help you build a positive credit score, with which you can get various advantages. However, delayed payments may adversely affect your credit score, therefore, it is advised that you pay your credit card bills on time. I hope this answer helps. For any further queries, please do not hesitate to contact us. Thank you.

Dear Client, The basic funcations of Debit Card is: • Source of Funds: Connected directly to your checking or savings account. • Working Principle: As soon as you use it, the money is immediately or nearly immediately subtracted to your account balance. • Debt/Interest: No because you are not borrowing. One can only spend what he or she possesses. • Impact on credit: There is no credit implication of using it. Credit Card: • Source of Funds: Linked to one of the lines of credit that the bank or card issuer has provided to you. • The Mechanics: You borrow money to a fixed limit (your credit limit). You are being given a monthly bill that you are required to repay. • Debt/Interest: When you fail to pay the entire balance within the due date, then you will pay huge interests on the outstanding amount and this will result in a debt. • Credit Impact: Good credit history is developed through responsible credit usage (on time, and in full). It is very destructive through careless usage. I hope this answer helps; if you have any further questions please don't hesitate to contact us. Thank you