Authorization Process
Debit card transactions are processed as ‘real-time’ transactions, where the funds are immediately withdrawn from the cardholder’s bank account. On the other hand, credit card transactions involve a line of credit extended by the card issuer, and the amount spent is billed to the cardholder at the end of the billing cycle.
Liability Protection
In debit card transactions, the cardholder is liable for any unauthorized transactions up to a certain limit if reported within a specific timeframe. Credit card transactions, on the other hand, offer more robust consumer protection against fraudulent charges, with liability often limited to a small amount or even zero liability.
Interest Charges
Debit card transactions do not incur any interest charges since the funds are directly debited from the cardholder’s account. In contrast, credit card transactions allow cardholders to carry a balance from month to month, subject to interest charges if the full amount is not paid within the grace period.
Rewards and Benefits
Credit card transactions often come with various rewards and benefits such as cashback, travel rewards, and purchase protections. Debit card transactions typically do not offer the same level of rewards, although some debit cards may have limited cashback or rewards programs.
Credit Score Impact
Using a credit card responsibly by making timely payments and managing credit utilization can positively impact the cardholder’s credit score. Debit card transactions, being directly linked to the cardholder’s bank account, do not have an impact on credit scores since they do not involve borrowing money.
