Lesson 3: Credit and Debit

A credit card and a debit card are two different types of cards that adults or even teens like you use to buy things.

A lot people say “don’t buy on credit, you would have to pay more than what you actually bought”.
What does this statement mean? When should you use a debit or credit card? Which one helps you collect more points?

Lesson 3 is all about answering those key questions, only then can you decipher which purchase requires credit card or a debit card

Debit cards, although very similar to credit cards in aspect of visuals, are very different from what a credit card does.

A debit card is connected to your bank account (where you keep money) so when you purchase something and use a debit card to pay, money will be deducted from your bank account.

For e.g., you buy clothes worth 2000 Rupees and you don’t have cash or online money to pay so you use a debit card that is connected your bank account. As the transaction occurs and the money has been given, 2000 Rupees from your bank account is deducted.

Credit cards, unlike debit cards aren’t linked directly to your bank accounts.

Instead, they allow you to borrow money from a credit company or the bank where you keep money in. You can repay that money later, think of it as a short-term loan that you can use anytime within your credit limit. Take the same example from above.

Buy clothes worth 2000 Rupees and use credit card to cover purchases and you will have to repay the amount to the bank instead the place where you bought the clothes. If the money isn’t paid back on time, interest will be added (just like how a loan works).

Days you delay payment: 0 days

💡 Tip: Every day you delay, interest keeps adding on and suddenly you owe the bank double than the price you bought things at.

When you borrow money using a credit card you are expected to pay it during a specific time.
When you don’t, the bank charges you on interest for not paying it on time.
The time given to you is usually around 30 days (basically a month) and if you can’t pay it back around that time, you would have to pay the interest along with the money.

When you don’t pay your bills on time, that is how debt grows. Little by little, you delay paying your credit card bills, the debt keeps growing and suddenly you owe the bank double than what you spent.

What is a credit score?
A credit score is like a report card with scores ranging from 300 to 850. It shows how likely you are to repay borrowed money. Pay on time and your score increases; delay payments and it drops.

How useful is a credit score?
Lenders use it to decide loan approvals. For example, to borrow ₹10,00,000 for a house, a strong score helps. A very low score (e.g., 350) makes loans unlikely.

As a teen, credit scores are not immediately essential except for student loans, but starting early helps.
Children under 18 can be added as an add-on user on a parent's card — this creates credit history.

Important factors:
Payment history = 35% of score; Credit history length = 15%; Credit utilisation is also important — keep it below 30%.

Final tip: make small purchases and repay on time. Even ₹200–₹500 monthly spending with clean payments builds a strong profile over time.

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