Debit card
A card linked to your own bank account, used at ATMs and to pay at shops. It spends money you already have, so there is no interest and no credit history needed to get one.
In plain language
A debit card spends your own money. When you pay with it, the amount comes straight out of your savings or current account.
A credit card is different: it spends the bank's money, which you must pay back later, with interest if you are late.
That single difference explains everything else in the booklet's comparison, and it is why the booklet suggests using a debit card instead of a credit card if you want to avoid spending beyond your means.
How it works
The booklet (Chapter 4) compares the two cards:
| Credit card | Debit card | |
|---|---|---|
| Source of funds | The lending bank provides the credit | Your own savings or current account with the same bank |
| Interest | Charged if the outstanding amount is not paid on time | Not applicable |
| Credit history | Relevant for issuing the card | Not relevant |
| Relationship with issuer | No need to have an account with the issuing bank | An account with the issuing bank is a pre-requisite |
Both cards can be used to withdraw cash at ATMs and for digital transactions.
Safety rules the booklet lists: change the PIN as soon as you receive the card; never write it down or tell anyone; prefer ATMs inside bank premises or guarded 24×7; use a virtual keyboard online; register for SMS alerts; tell the bank at once if the card is lost. The bank has no liability if you hand your ATM card to another person to use.
Minors above 10 years can get additional facilities such as an ATM or debit card. Under the Pradhan Mantri Jan Dhan Yojana, account holders receive a RuPay debit card.
A worked example
Amounts are illustrative.
Pooja, a college lecturer in Bhopal, has Rs 40,000 in her savings account and a credit card with a limit of Rs 1,00,000. Diwali shopping comes to Rs 55,000.
- On the debit card, the payment fails beyond Rs 40,000. She can only spend what she has. No interest, no bill to worry about.
- On the credit card, all Rs 55,000 goes through. If she pays only part of the bill on time, interest is levied on the rest. That is how the booklet's "debt trap" starts.
Two months later someone takes Rs 12,000 from her account with a copied card. She gets an SMS alert and reports it to the bank the same day. RBI's rules protect a customer who reports quickly when the fault lies with the bank or elsewhere in the system. Had she lent the card and PIN to her cousin, the bank would have had no liability.
Why NISM asks about it
Chapter 4 (Savings Related Products) has the credit-versus-debit table, the ATM safety list and the RBI rules on customer liability for unauthorised transactions. Chapter 8 (Borrowing-Related Products) has the tip "Use a debit card instead of a credit card". Questions ask which card needs an account with the issuer, where interest applies and whether credit history matters.
Common exam traps
- An account with the issuing bank is required for a debit card, not for a credit card.
- Credit history matters for a credit card, not a debit card.
- Interest is "not applicable" on a debit card.
- Both cards work at ATMs. An option saying only a debit card can withdraw cash is wrong.
- Handing your card to someone else ends the bank's liability.
- Reporting time: two phrasings. The Do's and Don'ts table says report unauthorised transactions "immediately or at least within three working days"; the RBI customer-liability section says within three days of receiving an alert from the bank. Both appear in Chapter 4; report at once and the difference never matters.
Check yourself
1.A father wants his 11-year-old son to have a bank account with a debit card. What does the chapter permit?
- a)No account is possible until the child turns 18
- b)Minors of any age may open a savings account through a guardian, and minors above 10 years may additionally avail internet banking, ATM/debit card and cheque book facilities
- c)Only a fixed deposit may be opened in a minor's name
- d)A minor may open an account only if the guardian holds a BSBDA
Show the answer
Answer: (b) Minors of any age may open a savings account through a guardian, and minors above 10 years may additionally avail internet banking, ATM/debit card and cheque book facilities
The savings account entry states: "MINORS OF ANY AGE can also open a savings bank account through their NATURAL OR LEGALLY APPOINTED GUARDIAN. MINORS ABOVE AGE OF 10 YEARS can also avail ADDITIONAL BANKING FACILITIES like internet banking, ATM/debit card, cheque book facility, etc." So both halves of the father's wish are available to an 11-year-old — the account through the guardian, and the card because the child is above ten. Note also that the BSBDA can likewise be opened "for individuals and also minors (through their guardian)", so a zero-balance option exists. Option (d) invents a condition the chapter does not impose; the BSBDA restriction runs the other way, barring its holder from opening another savings account in that bank.
2.Which of the following can a payment bank NOT do?
- a)Provide savings and current account facilities
- b)Issue ATM or debit cards
- c)Accept recurring or fixed deposits and give loans or advances
- d)Offer payment and remittance services
Show the answer
Answer: (c) Accept recurring or fixed deposits and give loans or advances
The chapter's payment bank entry: "Provides savings account/current account facilities. Can accept DEMAND DEPOSIT BUT NOT RECURRING/FIXED DEPOSIT. Can issue ATM/Debit Cards BUT NOT CREDIT CARDS. CANNOT GIVE LOANS/ADVANCES. Offer payment and remittance service through various channels." Learn the three prohibitions as a set: no fixed or recurring deposits, no credit cards, no loans or advances. Every exam question on payment banks is built from one of them. Set this against the small finance bank, which is almost the opposite creature — it exists to lend, taking small deposits and disbursing small loans to "small business units, micro and small enterprises, small and marginal farmers and entities in the unorganized sectors", serving "unserved and underserved sections of population." And note that a Business Correspondent is not a bank at all but "a representative of a bank who goes to customers."
3.According to the comparison in the chapter, which statement is correct?
- a)A credit card requires the holder to have an account with the issuing bank; a debit card does not
- b)A debit card requires an account with the issuing bank, while there is no compulsion to have an account with the bank issuing a credit card
- c)Credit history is relevant for issuing both cards
- d)Interest is levied on debit card transactions if not repaid on time
Show the answer
Answer: (b) A debit card requires an account with the issuing bank, while there is no compulsion to have an account with the bank issuing a credit card
The last row of the chapter's table reads: Relationship with the issuer — Credit Card: "NO COMPULSION to have account with issuing bank"; Debit Card: "HAVING AN ACCOUNT WITH THE ISSUING BANK IS A PRE-REQUISITE." This is the row that surprises people, and the reason is logical: a credit card is the lending bank's money, so the bank only needs to be satisfied about your credit history; a debit card is merely a key to money already sitting in your account there. The other rows follow the same logic — interest is levied on a credit card "if outstanding amount is not paid on time" and is "not applicable" to a debit card; credit history is relevant for a credit card and not relevant for a debit card. Both cards, however, "can be used for withdrawal of cash from ATMs as well as for digital transactions."
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- Credit cardA card that lets the holder pay using a lender's credit line rather than their own account balance, with interest charged if the outstanding amount is not paid on time.
- Credit scoreThe number a credit information company builds from your loan and credit-card repayment history, and the first thing a lender looks at when your application arrives.
- Customer liability for unauthorised transactionsRBI's rule that a bank customer bears no loss from an unauthorised transaction caused by fraud, bank negligence or a system failure elsewhere — provided it is reported within three days of the alert.
- Pradhan Mantri Jan Dhan YojanaThe Government's financial inclusion scheme launched in August 2014: a zero-balance bank account with a RuPay debit card, insurance cover, an overdraft facility and direct benefit transfers.
- Transaction alertsThe SMS and email messages banks send after every transaction — mandatory under RBI rules and built to let you reply and report fraud immediately, though registering for the SMS service itself may carry a charge.
- Payment BankA new category of bank that offers savings and current accounts, debit cards and remittances, but cannot give loans, issue credit cards, or accept fixed or recurring deposits.
- ExpenditureMoney spent on various items, both essential and non-essential. The booklet teaches you to save first and treat expenditure as what is left: Income − Savings = Expenditure.
- Business CorrespondentA representative of a bank, also called a Bank Mitra, who goes to customers in remote places and villages to open accounts, take deposits, transfer funds and give small loans.
- OverdraftA bank facility that lets a customer take a short-term loan to meet urgent needs, and repay it within the timeline agreed with the bank. PMJDY accounts carry one, limited to one account per household.