Difference between Credit card 💳️ and Debit Card | Pros & Cons

Are you looking for a card and confuse to choose debit or credit card? Visa or Mater card ? Rupay or Unionpay card? After reading this article you will clear about that, here we are going to discuss about difference between credit card and debit card. We will also talk about Dollar card also.

1. Debit Card

Debit card also called ATM (Automatic Teller Machine) card. We can use this card on ATM machines to withdraw our own money which are already deposited on our account.

If there is no money in your account then you can not use this card. Because it can withdraw until we have money on our account.

Some years ago, there was no any card facility in the banking system. We can withdraw money with the help of Cheque. But cheque can withdraw money from our account only in banking hours.

It means that we can withdraw money through cheque when bank is open. It consumes too much time and we can not withdraw in holidays.

So, banks develop the system of ATM card to withdraw money 24/7. It means you withdraw money through ATM card in any time and any days. ATM machine is opens for 24 hours, so you can fulfill your requirement of money any time.

It also reduces the costs of bank because there no need to visit bank and it is automatic and no need to appoint human resource in ATM.

2. Credit card

In early stage, there is no bank to provide loan to people. In this time people borrowed money form owners, landlords, relatives etc. and they charged high rate of interest.

Also, in nowadays people charged high rate of interest, if you borrowed money form individuals.

If you borrow money from individuals, they charged monthly 2%, 5% etc. then you should pay 24%-60% annually. But if you borrow money form bank, bank provides loan on 14-16% annually.

But there is lengthy process to approve loan from bank. If you need small amount of loan frequently then it takes too much time to approve loan form bank again and again. So, for the easiness of this situation the concept of credit card is developed.

Credit card is another type of plastic money which can withdraw money from your account as a credit. It means that credit card can withdraw money form your account even if there is not money in your account.

Bank provides debit card to all customers who demand for it. Bank provides credit card only to those customers who can fulfill card eligibility criteria.

Normally credit card is used to shopping, ticketing, online payment etc. so, you should pay money through credit card but if you withdraw cash and pay for something. Bank may charge cash withdraw penalty. So, normally you can not withdraw through credit card.

But there is a limit on credit card. It means that you can withdraw money through debit card until you have cash on your account.

Likewise, you can withdraw money form your credit card until you have not exceeded credit limit.

Bank provides different credit limits according to customer. Bank provides credit card only for those customers:

1.  If you are a salaried person and if you have a salary account in this bank
2. You must have minimum salary scale. There is different minimum salary scale you must have to get credit card varies from one bank to another.
3. If you are a business owner
4. If you are a self-employed person
5. Minimum age of 18 years
6. If you are a regular and trusted customer of bank

You should have to submit application, password size photo, proof of identity such as citizenship, passport, PAN etc., latest salary slips, bank statement, income proof, proof of business etc.

After submitting the documents to bank, bank consider these documents and if you fulfill the eligibility criteria of bank then you can get credit card.

There is equal chance of getting rejected if you have not fulfilled eligibility criteria.  

Credit card is the source of use bank’s money as a loan for you immediately. You should pay back this money with interest.

There are various provisions for credit card bank to bank, normally, if you payback this money within 30-45 days then no need to pay any interest for this money.

If you have not paid money within 30-45 days then you should pay certain percentage of interest according to you bank rule.

3. Dollar (Prepaid Card)

Dollar card is used to pay money in foreign country. Normally, we cannot pay of settle bill of foreign country with Debit and credit card.

Suppose we bought a hosting form American hosting provider then there is not any provision to pay external payment with these cards. Dollar card use to pay money online if you had made any international transactions.

For the foreign payment there is a separate card that is dollar prepaid card. Dollar currency is generally accepted in all county.

So, dollar card is used to settle foreign transaction. PAN card is compulsory to issue a dollar card.

We can pay for hosting and domain, gaming top-up, google play console, online advertising, Apps and movies, online shopping, online video subscription platform like Netflix with the help of dollar card.

But there is a limit on dollar card. In case of Nepal, you can pay only 50$ only annually with one dollar card.

And there is not any provision to issue multiple dollar cards. It means that if you have one bank’s dollar card you can not issue next dollar card in another bank.

Nepal Rastra Bank directive provisioned for only one dollar card for one person.

What is Visa Card/Master Card/RuPay card

If you have a Atm card or debit card there is a logo of Visa or SCT or Union Pay or Master card or RuPay card etc. These all are the different financial service provider companies.

In other words, these companies are the card network companies which builds the interconnected network between one bank to another.

It means that, in the past years there is not provision of visa, master card, Rupay card etc. In this time, you have only an ATM card of bank.

In other words, if you have a bank’s debit card you can withdraw money form only this bank’s ATM machine.

But if you have a visa debit card, then you can withdraw money form any bank’s ATM machines. Like this, Master, RuPay, Union Pay, SCT etc. are the financial service provider companies.

If your card has logo of any of this companies then you can withdraw money form any bank’s ATM machine.

These financial companies connect the different banks with each other for easy and fast transactions. It means, if you have an account on “A Bank” and you want to withdraw money form “B Bank” then how to know “B Bank” how much money in your account because “B Bank” does not have any information about your account.

So, Visa, Master, Union pay, RuPay, SCT etc. connects one bank with another with card network. Then you can withdraw money form any bank’s ATM machines or all ATM machines accept your card.

In the international market Visa contribute the first positions and Master card contribute the second position in the card network market and other companies contributes minimum shares in market.

Safety measures for cards

If you are a card holder of any bank and any card. You should consider and follow the following safety measures and tips which can help to secure your card:

1. Never share your card details with any person.
2. Never share your card pin number, OTP (One Time Password) with anyone even friends and family members.
3. Do not enter ATM pin Infront of other people.
4. If you realize your pin has been hacked then change your pin immediately.
5. If you lost the card then contact to your bank and request to block this card.
6. Update your email id and phone number in bank account if you forget old email id and lost old sim card.
7. Do to enter your card detail in websites and before entering your detail on websites check the SSL (Secure Sockets Layer) certificate of website which represents when you enter any information sent to this website is private.
8. If you pay online, always pay with your device. Do not use others device to pay such as cyber etc.

Advantages of using cards

1. Fast settlement of transactions transaction and easy online payment
2. No need to carry cash and cheque book.
3. You can get different offers and discount while paying with cards
4. You can check your bank balance with debit card. So, not need to visit bank to check your balance.
5. You can also check your mini statement (last 5 transactions) in Atm machine through ATM card.
6. You can transfer fund to others bank and accounts by using ATM machine through debit card.

Disadvantage of using cards

1. You should pay charges and fees for debit, credit, prepaid dollar card annually. It may vary from bank to bank.
2. It is not secure than using cheque book and cash. There is chance of being fraud while online payment, chance to be hack your account and card. If someone got your card information then they can misuse your card.
3. If you use credit card, it makes habit of using credit and you should pay interest for that.