Post the 2020 lockdown, India witnessed a steep rise in cashless transactions over the levels seen during the lockdown. According to the Reserve Bank of India’s data, transactions made during 2020 through credit cards and debit cards formed a key part of cashless transactions. A 111 percent jump in the credit card and debit card transactions by value was recorded in June 2020 as compared to April the same year. Even the cash withdrawals through ATMs saw a rise by Rs. 1 Lakh Crores between April and June 2020.
What is a Credit Card?
What is a credit card? A Credit card is a secured plastic card that is loaded with a predefined credit limit, upto which its owner can borrow funds from the bank or financial institution that issued the card. The credit card can be used for swiping at a POS, or shopping online well within the predefined credit limit. The borrowed credit amount would be repaid by the customer at a later date as decided by the bank. Once the amount used is repaid by the customer, the credit limit of the card goes back to its original limit. Any delay in paying the credit card bill within the stipulated date shall attract an interest amount depending on the total amount due.
What is a Debit Card?
A Debit card is also a secured plastic card issued by a bank to its customer on his/her savings or current bank account for accessing the account’s funds without a cheque or cash withdrawal. So, a customer can only spend the bank balance available in the account using his debit card. A debit card is an instant mode for cashless payment, in the sense that, whether the debit card is used for withdrawing money from the ATM, swiping at a POS terminal, or shopping online, the amount gets deducted immediately from the linked bank account provided there are sufficient funds in the account. The deducted is reflected in the latest available balance of the bank account.
Difference between a Credit Card and a Debit Card
Some of the key features of a credit card and debit card highlight the difference between a credit card and a debit card as stated below:
Credit Limit
- Depending on the card type chosen, borrower’s credit history, and CIBIL score, a Credit Card comes with a predefined credit limit whereas the total savings in the bank account is considered as a credit limit for a debit card
- In the case of a credit card, there are no restrictions on the per day usage amount within the given credit limit whereas there is a per day purchase limit on the debit card as decided by the bank
Cash Withdrawals
- Cash withdrawals using a credit card entails a withdrawal fee and interest and no charges are levied on cash withdrawals made with a debit card from the concerned bank’s ATM
Overdue Charges
- Credit card bill payments that are not done within the due date are liable to attract an interest amount as overdue charges
- No such charges or interest is applicable for debit card payments as the amount is directly deducted from the linked bank account
Annual Fees
- Credit cards usually are charged with an annual fee that may get waived off, if the annual spending exceeds a certain amount
- No annual fee is applicable for debit cards
Conclusion
Both Credit cards and Debit cards can be securely used online as well as offline at merchant outlets. Just as a PIN is essential for transacting with these cards offline or in person, a CVV number is extremely important for secure online transactions. A CVV number or Card Verification Value is generally a three-digit number located on the rear side of credit and debit cards that ensures the prevention of fraud while transacting online. Purchases made with credit cards are known to offer exclusive benefits such as convertible reward points, cash backs, discounts, and gift vouchers.
So, if you are planning to get a credit card for yourself, Finserv MARKETS is the place to apply for and avail of it. On Finserv MARKETS, you can now lookout for a credit card from a basket of credit cards from reputed banks, to suit your lifestyle needs. Besides enjoying a host of benefits, rewards, cash backs, discounts on a credit card from Finserv MARKETS, you can also convert your purchases into EMIs and stay protected against fraud and identity theft.