Difference between Credit Card and Debit Card- its features and how it works
When it comes to managing your finances, it is important to know the difference between credit and debit cards. Both the cards provide convenient ways to make payments. But both work on different principles. In this blog post, we will learn about the use of each card and which card will be right for managing your finances. So lets deep dive into the world of finance and understand how credit card works and how debit card works. How Credit Card Works ? A credit card is a type of card which is issued by a financial institution up to a certain limit and that limit depends on your salary or income. For example if your salary is 0-1 lakh then just for example your credit limit will be 25000 and you cannot spend more than that credit limit like you cannot spend more than 25000 and if you do not return this credit money to the bank within a month then interest is charged on it and if you return the credit card money before a month i.e. before 30 days then you will not have to pay any interest. Features of Credit Card Line of Credit :Purchasing is permitted up to the credit limit. Interest : Interest on the unpaid balance will be charged if you have a balance. Grace Period : The Majority of Credit cards have a grace period during which clearing off your entire debt might save you some cash on interest. Rewards: Many credit card companies also offer rewards if you have good CIBIL performance, such as cashback, discounts etc. Cibil Score : Using credit cards wisely might raise or lower your credit score. How Do Debit Cards Work? Your checking account is instantly linked to a debit card. Your bank account receives a charge when you use a debit card. It’s simply a digital form of cash. Features of debit card. Directly connected to your checking account: real time cash withdrawals from you bank account. Interest free transactions : Interest-free transactions done with a debit card are allowed. Protection from overdraft : Overdraft protection is a feature which some banks provide to help you prevent overdrawing your account. ATM Access :ATM withdrawals and in store purchases are two main uses of debit cards. Key differences between debit cards and credit cards Selecting your ideal card You can select a good card by looking at your financial habit, what kind of spending is yours – credit or cash. There are some facts here which will make it easier for you to select. Spending Behavior : If you are disciplined regarding your expenses and you can make the credit card payment on time every month, then the credit card can be increased due to which you will also get rewards. Credit Score: If you are looking for a tool that will help you increase your credit score then credit card will prove to be a good tool. Emergency funds : Should an emergency arise, having access to your money through a debit card can be a wise decision. financial limitation : Debit cards can help you stick to your spending limit, so they can be a better option if you have trouble with spending without thinking. In Conclusion : There are benefits and drawbacks to both debit and credit cards. You may choose the one that best suits your financial needs by being aware of how they operate and their key differences. Recall that you have the ability to efficiently manage your finances if you utilize either card responsibly.
