Difference Between Credit and Debit Transactions

Using cards to make purchases is considered easier than cash transactions due to several reasons including ease of access. The two main types of cards include credit cards and debit cards. The respective transactions differ based on their area of applicability and the way they allow users to spend money. All the differences are exclusive and both the transactions are put to use in different modes of financial functions.

Credit Transactions vs Debit Transactions

The main difference between credit transactions and debit transactions is that credit transactions can be used to spend from existing accounts while debit transactions can be used to spend money after borrowing the same from banks. This difference owes its existence to the mode of spending and the way the user limits the transactions. Both the transactions are equally feasible for making offline as well as online purchases.

Credit transactions can be made using credit cards. They ensure easy access to the money stored in the accounts. It is an easy cashless way to make purchases. A single swipe allows the user to transfer the money from the account directly from the account to the concerned vendor. Some disadvantages of credit transactions include unlimited spending which might create an imbalance in the monthly budget at times.

Debit transactions can be made using debit cards. Such transactions suit people who do not wish to spend money from existing accounts. Using this model of spending money, a user can borrow a certain amount of money from the bank and then spend it anywhere. Once the borrowing period ends, the money is required to be paid back to avoid any additional charges or hefty default duties on the borrowed amounts.

Comparison Table Between Credit Transactions and Debit Transactions

Parameters of ComparisonCredit TransactionsDebit Transactions
DefinitionThey help spend money from the current account or savings account. They help spend money directly taken from banks.
Additional ChargesInterest is not applicable on credit transactions. Interest is applicable if the payment defaults or deadline is exceeded in paying debit card bills.
LimitationsCredit transactions allow the unlimited expenditure. Debit transactions do not allow unlimited expenditure as the bank provides a limited amount.
Types AvailableThe variety of credit cards is limited. Debit cards have numerous types and they vary based on the type of spending.
Eligibility of UserAnyone can make credit transactions after a specific age. A user should be possessing a certain minimum income to make debit transactions using the designated card.

What are Credit Transactions?

Credit transactions allow a user to make use of a credit card to access saved money. This money can be accessed from the accounts the person has. One card caters to a single account. The credit score of the person making credit transactions is not affected by the same in any way. On the other hand, the absence of a spending limit might encourage reckless expenditure leading to more outflow of money from the accounts specified.

Most credit cards allow a one-month time period before the customer is required to make up for the balance amount. The total sum includes the accumulation of outstanding balance and purchase amount.

Due to the prevalence of cyber frauds and tracking, banks and other related agencies should avoid saving the credit card details of users while making online transactions. For offline transactions, the pin should be entered in seclusion to avoid the provision of access to any other person apart from the card owner. Above all, the user must stay away from mindless spending owing to the accessibility through a single swipe or touch using these cards.

What are Debit Transactions?

Debit transactions are made for spending a predecided amount of money. The source of money is a bank in this case and the spender has to pay back the bank before the limit is exhausted. This is essential as timely payment leads to an increment in the credit score. These transactions are a bit risky because in case the user is unable to repay before the deadline, the bank begins charging interests at exorbitant rates.

Debit cards are much prevalent due to the wide variety available. A checking account is also required for the purpose of making debit card transactions. The expenses exceeding the same are subsequently regarded as overdrafts. Similarly, if the expenses are below the mark, the user is easily allowed to spend more in the following periods of renewal.

Overall, debit transactions suit regular spenders as the user can easily keep a track of expenses incurred and sums paid back. The interest rates vary from time to time but the value always exceeds the general interest rates due to the availability of extra funds.

Main Differences Between Credit Transactions and Debit Transactions

  1. Credit transactions help the user spend money from an existing current or savings account. On the other hand, debit transactions help the user spend money after borrowing it directly from the bank (which is to be repaid later).
  2. All credit transactions are interest-free irrespective of the amount spent while all debit transactions incur interest if not paid completely by a specific predecided date.
  3. One can make purchases of unlimited amounts using credit cards while the purchases made through debit transactions are limited based on the amount allowed by the lending bank (applicable for different debit cards respectively).
  4. Credit transactions offer limited variety to the person making transactions while debit transactions are diversified due to the number of cards available for different purposes.
  5. There is no specific eligibility criteria for making credit transactions. On the contrary, people cannot make debit transactions unless they reach specific targets of income and other financial stability parameters.


Credit transactions, as well as credit transactions, have their own pros and cons in the economic industry. It is essential to have complete knowledge regarding the benefits and subsequent risks. Though they offer easy modes of making purchases, the associated financial risks might surely take a toll if handled carelessly. Imposing a calculated limit is the easiest way to cap the expenses while utilizing the cards.

One can become a spendthrift in no time if either the credit card or the debit card is put to lavish use. Such an application of technology to cashless use of money proves fruitful while making big purchases. In case the transactions are made daily, the statement should be duly checked to avoid any risks. Once the cards are in use, the expiry period should also be kept in mind.


  1. https://link.springer.com/article/10.1007/s10603-009-9098-5
  2. https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1538-4616.2008.00107.x
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