Debit Card

A debit card allows you to make purchases directly from your savings account. As long as your account has funds, the card can be used. Types of debit cards include:

1. Standard Debit Card: Directly withdraws funds from your bank account.
2. Prepaid Debit Card: Limited to pre-loaded funds and can function without a bank account.
3. Electronic Benefits Transfer (EBT): Issued by government agencies to access benefits like food stamps and cash assistance.

Credit Card

A credit card is issued by banks or financial entities with a preset limit for short-term borrowing. When you use a credit card, you agree to repay the borrowed amount under specific terms. Main credit card types include:

1. Standard Card: Basic credit card with no frills.
2. Secured Credit Card: Requires a security deposit which equals the transaction limit.
3. Reward Card: Offers cashback, travel points, and other perks.
4. Charge Card: No preset spending limit but requires full repayment each month.

Difference Between Debit Card and Credit Card

While debit cards and credit cards look similar with features like 16-digit numbers, CVV, and expiry dates, their uses differ drastically.

1) Impact on Credit Score

1. Builds your credit history
2. Shows repayment behavior
3. Reflects credit management habits

Credit cards help build your credit score by reporting payment history. Responsible use, like timely payments and low credit utilization, strengthens your credit profile. Debit cards do not affect your credit score since they use existing funds. Poor credit card habits, like overspending or maxing out limits, can damage your credit score.

2) EMI Choice

Debit cards do not typically offer EMI. Some banks provide EMI on debit purchases, but require fixed deposits and sufficient balance at the time of purchase. Funds are first deducted and then reimbursed before EMI starts.

Credit cards allow you to convert purchases into EMIs. However, interest, taxes, and additional charges may apply. Using multiple credit cards for EMIs can reduce your credit score if not managed properly.

3) Purchase Protection

Both debit cards and credit cards use PINs for security. Credit cards usually offer purchase protection, liability cover, and chargeback services for fraud. Debit cards lack built-in protections unless enrolled in a Card Protection Plan (CPP). Additionally, credit cards offer cashback, air miles, and fuel points.