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.
Key Takeaways
- Credit transactions increase the balance of an account, while debit transactions decrease the balance of an account.
- Credit transactions are used for purchases, while debit transactions are used for cash withdrawals or to pay bills.
- Credit transactions can accrue interest charges, while debit transactions do not accrue interest charges.
Credit Transactions vs Debit Transactions
The 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 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.
Debit transactions can be made using debit cards. Such transactions suit people who do not wish to spend money from existing accounts.
Comparison Table
| Parameters of Comparison | Credit Transactions | Debit Transactions |
|---|---|---|
| Definition | They help spend money from the current account or savings account. | They help spend money directly taken from banks. |
| Additional Charges | Interest is not applicable on credit transactions. | Interest is applicable if the payment defaults or deadline is exceeded in paying debit card bills. |
| Limitations | Credit transactions allow the unlimited expenditure. | Debit transactions do not allow unlimited expenditure as the bank provides a limited amount. |
| Types Available | The variety of credit cards is limited. | Debit cards have numerous types and they vary based on the type of spending. |
| Eligibility of User | Anyone 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.
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 the outstanding balance and purchase amount.
Due to the prevalence of cyber fraud and tracking, banks and other related agencies should avoid saving the credit card details of users while making online transactions.
What are Debit Transactions?
Debit transactions are made for spending a pre-decided 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.
Debit cards are much more prevalent due to the wide variety available. A checking account is also required for the purpose of making debit card transactions.
Overall, debit transactions suit regular spenders as the user can easily keep track of expenses incurred and sums paid back.
Main Differences Between Credit Transactions and Debit Transactions
- 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.
- There are 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.
- https://link.springer.com/article/10.1007/s10603-009-9098-5
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1538-4616.2008.00107.x
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