Credit cards and Debit cards

Banking Awareness Study Material

Credit cards and Debit cards and the Difference between Credit cards and Debit cards

Credit cards

Credit cards are cards which are issued by a bank or a financial institution etc. which allows the card holder to make purchase goods or services on credit. A credit card provides temporary financial support to the card holder. The credit has to be repaid within the billing cycle. Interest is charged on the amounts which remain unpaid at the end of the billing cycle.

Debit cards

Debit cards are cards issued by banks where the amount spent by the card holder, on purchase of goods or cash transactions etc., is immediately debited to his account with the bank. There is no credit facility from the bank and no monthly bills are raised.

Difference between Credit cards and Debit cards

• A Credit card is a postpaid card whereas a Debit card is a prepaid card. It means that when a credit card is used the money has to be paid afterwards to the credit card issuing company whereas, in a debit card, first the money has to be deposited in the account of the card holder and then the card can be used.


• When using credit cards, monthly bills have to be paid to the credit card company and interest is charged over the unpaid amounts, whereas no bills have to be paid when using debit cards since the money gets debited directly from the savings account linked to the debit card.