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What is Credit Card?
A credit card is a type of financial product that allows consumers to borrow money in order to make purchases. Credit cards are issued by financial institutions, and they come with a credit limit, which is the maximum amount of money that the cardholder can borrow. Credit cards also come with an interest rate, which is the rate of interest that the cardholder will be charged on any outstanding balance.
Credit cards can be used to make purchases at stores, online, or over the phone.
Using a credit card responsibly can help build your credit history and improve your credit score. Many credit cards offer rewards programs, such as cash back or points, which can be redeemed for travel, merchandise, or gift cards.
Credit cards are generally more convenient than cash or checks and can be used to make purchases or withdrawals anywhere that accepts credit cards.
Credit cards can provide emergency funding in the event of a job loss, medical emergency, or other unexpected financial setback.
What is Debit Card?
Debit cards is a type of financial product that is linked directly to your bank account. This means that when you use your debit card to make a purchase, the funds are transferred directly from your account to the merchant. Debit cards can be used to withdraw cash from an ATM, or to make purchases anywhere that credit cards are accepted.
Debit cards offer a convenient way to access your money and can be used anywhere that credit cards are accepted. One of the main advantages of using a debit card is that you can avoid paying interest on your purchases, as you would with a credit card.
Additionally, debit cards are often less expensive to use than credit cards, as they often have lower fees.
Debit cards are also used to transfer money between accounts, such as from a checking account to a savings account.
Difference Between Credit Card and Debit Card
- A credit card is a type of loan that must be repaid with interest, while a debit card allows customers to spend money by drawing on funds they have already deposited in the bank.
- A credit card gives the cardholder a line of credit with which to make purchases. A debit card, on the other hand, is like an electronic check
- A credit card entails borrowing money from a lending institution, whereas a debit card is linked directly with a checking account
- Another difference between credit and debit cards is the fees that are associated with them. Credit cards have annual fees, balance transfer fees, and cash advance fees. Debit cards, on the other hand, have no annual fees and may have a small monthly fee.
- A credit card allows consumers to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash. A debit card, on the other hand, allows bank customers to spend money by drawing on funds they have already deposited in the bank.
Comparison Between Credit Card and Debit Card
|Parameters of Comparison||Credit Card||Debit Card|
|Features||Offer more features, may offer cash back rewards||Lower credit limits than credit cards|
|Fees||charges an annual fee||Do not charge an annual fee|
|Card limit||Have more limit than Debit card||Have lower credit limit|
|Interest Rate||High interest rates||Low interest rates|
|Credit history||Using a credit card can help build your credit history||Using a debit card cannot help build your credit history|