Credit card

All About Debt and Credit card?


Debit and Credit are the 2 types of cards that banks are offered to the customers for easy payment transactions in online and money withdrawal. Debit cards allow customers to spend money that they have in the bank account. Credit cards allow consumers to borrow money for purchase items or withdraw cash from the issuer of the card up to a certain limit. Through this blog, you will understand the following.

  • What is mean credit card?
  • What is mean by Debit card?
  • What is the difference between debit cards and credit cards?
  • Features of credit and Debit card?
  • What is credit card uses?
  • How credit card companies make money?
  • What are different types of credit cards?
  • Top Credit cards providers in India?
  • What is a credit card limit?
  • Advantages and Disadvantages of credit cards?
  • What is a Credit trap?
  • Want to get out of the credit card debt trap?

What is mean credit card?

Credit cards are thin rectangular pieces of plastic or metal, which allow consumers to borrow money for purchase items or withdraw cash from the issuer of the card, up to a certain limit. A credit card is issued by a bank or financial services company. A credit card allows cardholders to borrow funds and pay against the purchase in merchants cash counter, where card payment is allowed and in online portals.

What is mean by Debit card?

A debit card is a payment card issued by a bank to deducts money directly from a user’s bank account to pay for a purchase in a merchant’s cash counter, where card payment is allowed. Debit cards eliminate the need to carry cash to make purchases. Using a Debit card, users can do purchase the maximum limit up to the balance in the bank account. The debit card also helps to withdraw money from the ATM mission.

What is the difference between debit cards and credit cards?

  • Credit cards give credit to the user for payments up to a limit, but debit cards deduct money from the bank account for payments.
  • Credit cards offer better consumer protections than debit cards.
  • Credit card charges and fees will be costlier than a Debit card.
  • Credit card transaction has a limit but the Debit card can use up to the last amount in the saving account.

Features of credit and Debit card?

Bill :

For credit cards, bills generated every month but no bill generated for debit cards, only an account statement will generate.

Linked to:

Credit card links to the issuing bank or financial institution that provides the card, but debit card link to the cardholder’s bank account.

Credit limit:

The credit limit of a credit card decided on the base of user eligibility on a monthly basis but for a debit card, cash withdrawal and POS daily limit decided by the government and bank. A debit card can use for transactions up to the last amount in a bank account.

Interest charged:

If the user not cleared the credit card bill on time, need to pay interest from the date of the transaction, but in the Debit card transaction as using the amount in a bank account, no interest need to pay.

Credit score :

If a customer clears the credit card bill within the due date, it helps to improve the credit score, else it affects negatively. As there is no credit taken using a debit card, it will not affect the credit score.

What is credit card uses?

  • A credit card is a convenient financial product provided by banks or any other financial institution for easy payments.
  • A credit card or debit card can be used for everyday purchases such as stationery, vegetables, groceries, and other goods and services.
  • Credit cards help to build a good credit score if pay the bills on time.
  • Credit cards help to earn rewards such as cashback.
  • For online transaction credit card provide more protection against online

How credit card companies make money?

Three main sources of income for credit card companies are

  • By collecting late and annual fees.
  • Transaction % fees collected from merchants.
  • Interest charges on non-repayment of bills.

Fees: Credit card companies charge annual fees for every card they provided to the customers and also they charge late fees if payments delayed.

Interest charges: If credit card users fail to pay off the due bills at the end of the due date, the bank charges interest on the borrowed amount from the date of borrow. The percentage of interest will be calculated on the annual base percentage for no deferred days.

Transaction charges: Credit card companies collect a fixed percentage of charge from merchants for each transaction, who accept card payments. These charges will be approximately 1.75% of each transaction, it will vary from card to card and bank to bank.

These three are the major source of income for credit card companies, in addition, some companies charge a small fee on the credit card account opening and processing.

What are different types of credit cards?

Basically, there are three types of credit card available for users:

  • Bank-issued credit cards, such as Visa and MasterCard.
  • Stores specific credit cards, such as Sears and Bay
  • Travel/petrol/entertainment cards, such as Diners Club or American Express.

Top Credit cards in India?

There are many banks offers a credit cards in INDIA, few of them are listed below. Select the card on the basis of its advantages after considering our requirements. Few criteria need to consider such as fees and annual charges, reward points, interest for the late payments before finalizing the card.

  • Yatra SBI Credit Card
  • YES Prosperity Edge Credit Card
  • HSBC Visa Platinum Credit Card
  • ICICI Platinum Credit Card
  • Citi Cashback Card
  • Axis Bank Neo Credit Card
  • Kotak PVR Gold Credit Card
  • IndusInd Bank Platinum Credit Card
  • IndianOil Citi Platinum Credit Card
  • Axis Bank Neo Credit Card
  • IndusInd Bank Platinum Aura Edge Credit Card
  • HDFC Bank Diners Club Black Card
  • HDFC Bank Diners ClubMiles Card
  • Citi Rewards Credit Card

What is a credit card limit?

A credit limit is the maximum amount of money a consumer allowed to spend using a credit card in a billing cycle. The credit limits are determined by banks or credit card companies that provide the cards. Mostly credit limit is decided based on the income and credibility of the borrower.

Advantages and Disadvantages of credit cards?

A credit card is like a 2 sided sword, it has its own advantages and disadvantages. Credit card is beneficial to users if use it carefully like make sure of paying bills within the due date.

Advantages of using credit cards

There are many advantages to using a credit card, instead of cash for the purchase.

  1. Proper use of credit card help to building credit history and help to improve credit score.
  2. Source of quick money for emergency
  3. Getting money on credit without interest within the due period.
  4. Secured payment during the online transaction.
  5. Most of the credit card provides payback points which we can redeem in some stores or online sites.

Disadvantages of using credit cards

There are several disadvantages along with the advantages of the credit card.

  1. Credit score damage- Credit-worthiness will go down if customers defer the payment.
  2. The temptation to overspend- Due to credit amount, customers mentally force for unnecessary purchases.
  3. Interest charges- If customers not paid in full amount within due date, high-interest rates need to pay.
  4. Annual fees of credit cards become an additional expense.
  5. Need to pay late payments fees, for delayed payments.

What is a Credit trap?

A credit trap occurs due to a situation in which the borrower is unable to make payments on the loan principal due to the high amount of interest need to pay first. Due to the high rate of interest, once credit bills go to interest payments, most of the users find it difficult to afford to make the payments on the interest and principal. Once customers enter into the credit trap, the creditworthiness will go down and it will be a blocking factor for getting a better loan at lower interest rates.

How to get out of the credit trap?

Want to get out of the credit card debt trap?  Follow these smart step which helps to get out of the credit trap.

Step 1: Take a personal loan with a lower interest rate of 12-18%, and clear all credit card dues which have higher interest rates in the range of about 30-40% per year.

Step 2: For the new purchase requirements, select EMI options.

Step 3: Pay the loan amount first then think about other expenses, as now a personal loan having the highest interest rate need to pay.

Step 4: For new requirements make use of card holiday periods maximum so that users will get maximum credit time for the re-payments.

Step 5: Slowly finish all the due in the personal loan, before taking up big further expenses.


A credit card is a 2 sided sword, which has advantages and disadvantages. Credit cards help the borrowers if it used effectively. Credit card is one of the easiest financial instrument which helps customers to meet the emergency financial needs. As it is the easiest financial instrument, it may lead to the temptation to overspend and end up in the credit trap.

A credit card is one of the important financial instruments to improve the credit score of the users. If a customer had a good credit score, it will help them to get other loans like personal, business loans easily. Before paying using the credit card, make sure that the borrower will have a source to pay back the amount before the due date.

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Harry J P is a Business development and sales professional passionate about sharing knowledge in the domain of sales, and personal finance which helps in Personal financial learning for newbie earners. This blog came out of the experiences in the domain of personal finance, business development, and the share market.

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