Credit Card Vs Debit Card-Differences Dubai UAE
Ever wondered what differentiates a credit card from a debit card even though both look similar? Is one superior over the other?
Yes, both credit cards and debit cards look similar but there are some significant differences between each, particularly pertaining to how they work, liability and fraud.
Below are 10 differences between Credit Cards and Debit Cards:
#1. Interest Charge:
Credit cards come with a fixed or variable interest charge provided you carry a balance month-on-month. If you pay the credit card bill in full every month, then there is no question of interest.
In case of debit cards, there is no question of interest as your are using your own funds from your bank account.
#2. Line Of Credit:
As far as credit cards are concerned, you have a line of credit. And there is a limit to it. The issuing bank can either raise or reduce it depending on certain factors.
But in case of debit cards your line of credit is the amount of deposit you have in your bank account in UAE.
#3. Credit History:
This is particularly relevant to US and other countries which have a system of credit score. This system is here too in UAE. Al Etihad Credit Bureau is in early stages and I am sure there will be a progressive and potent credit scoring system and your credit history will play a major role in developing a pristine credit record.
Coming back to credit history, with credit cards you can build your credit history but you can’t do the same with debit cards. After all, with debit cards, you are paying from your own bank account.
#4. Sources of Funds:
When you use your credit card in UAE, you are using borrowed funds and these are the deposits made by customers of banks, credit issuing companies and other financial institutions. For Example Emirates NBD, Dubai Islamic Bank, National Bank Of Abu Dhabi etc.
But when you use your debit card, you used your own funds from your own bank account. So it is your own money that your are using.
#5. Countering Charges:
In case of credit cards, you get your monthly credit card statement. So you can counter any charges that you think are not made by you or if someone has fraudulently used your credit card information. So you can detect fraud or irregularities before the money goes into bank’s hands.
But in case of a debit cards, when it is swiped or inserted, money gets debited immediately.
#6. Monthly Statements:
In case of credit cards, you get a monthly statement which includes your transactions, interest rate and other important changes.
Since money is debited immediately when you use a debit card , no monthly statement is given.
#7. Credit Limits:
There is a credit limit associated with a credit card. The issuing bank can increase it or decrease it based on your credit standing.
But the credit limit on a debit card is equal to the amount of deposit in your bank account. So it is under your control and not banks’.
There are a lot of fees associated with a credit card like late payment fee, over-limit fee, penalties for missed payments and like.
But you don’t have such fees associated with debit cards. You can stretch your finance to the limit of deposit in your debit card account.
#9. Bank Account:
Credit cards are usually not associated with a bank account but debit cards are associated with a bank account.
Even though you can use your credit card to take cash advances, you will be slapped with a high interest rate and also a cash advance fee. But in case of a debit card, you can withdraw cash without any charges because it is your own money!
Check out the infographic ‘Credit Cards Vs Debit Cards‘ via ‘
What other differences I have missed? Let me know in comments!