Credit Card vs Debit Card: what’s the difference?

Learn the key differences between credit cards and debit cards and which card is right for you.

Most credit cards and debit cards look almost the same, and both are labeled “Credit Card vs Debit Card.” They both have EMV chips, magnetic strips, 16-digit card numbers, and expiration dates. Both can make it easy and convenient to buy things in stores or online, with one key difference. With a debit card, you can use money from your bank account to pay for things. With a credit card, you can buy things or get cash by borrowing money from the company that gave you the card up to a certain limit. Most likely, you have at least one credit card and one debit card in your wallet.

They are hard to beat when it comes to convenience and safety, but they are different in important ways that could have a big effect on your budget. Both credit cards and debit cards can be used to pay for things, but there are important differences between the two. Most importantly, credit cards are money that you borrow from a bank, while debit cards take money right out of your bank account. Many people have one of each in their wallets and find it helpful to use one or the other depending on the purchase or the situation. When deciding which card to use, there are many things to think about.

What is a Credit Card?

With a credit card, you can get a line of credit that you can use to pay for things. It works like a loan that you can use to buy things and then pay back each month. Your credit limit is the maximum amount of credit you can get from a lender. This amount is based on things like your income and credit history. Unlike a debit card, how you use and pay for a credit card shows up in your credit report and affects your credit score. You can get cash advances and move your balance with a credit card. A lot of the time, they also have perks and rewards.

What is a Debit Card?

A debit card is linked to the account you use it with. It lets you access your account money directly for transactions and also works as an ATM card so you can get cash right away. Most of the time, you can only spend as much as you have in your account. If you try to spend more than that, your transaction will be turned down. Debit cards don’t have interest rates or annual fees, and you can’t move money from one card to another. Most debit cards don’t come with perks or rewards. But at some banks, the money in your checking account can earn you interest.

Credit Card vs Debit Card: How Each Card Is Played (Works)

Both credit cards and debit cards can be used to pay for things in stores, online, or over the phone. But there are some important differences in how they work.

FeatureCredit CardDebit Card
How it worksBorrows money from the issuerDeducts money from your checking account
InterestYou have to pay interest on the amount you borrowNo interest
Fraud protectionOffers more protection against fraudOffers less protection against fraud
Building creditHelps you build your credit historyDoes not help you build your credit history
FeesMay have annual fees and other feesMay have ATM fees

Credit Card: When you use a credit card, the company that gave you the card is lending you money. The company that gives you the card gives you a line of credit, which is the most money you can spend with it. When you use your credit card to buy something, the amount is taken out of your line of credit. Then, every month, you have to pay back the amount you borrowed plus interest.

Debit Card: When you make a purchase with a debit card, the money comes right out of your checking account. This means that you can only spend money that is already in your account. Since debit cards don’t come with a line of credit, you can’t borrow money from the company that gave you the card.

Credit Card vs Debit Card Comparison Table

Credit cards and debit cards are different ways to manage your money. Even though both make it easy to do business, they are different in important ways. A credit card lets you borrow up to a certain amount of money, but you have to pay it back with interest. Debit cards, on the other hand, take money straight out of your bank account. This makes sure you don’t spend more than you can afford.

AspectCredit CardDebit Card
Source of FundsCredit line from the issuerFunds from linked bank account
Payment FlexibilityRevolving credit with interestDirect spending from own funds
OverdraftYes, can lead to debtNo overdraft, declines if no funds
Interest ChargesYes, on unpaid balancesNo interest, uses available funds
Credit CheckOften required during applicationNot typically required
Building CreditCan help establish credit historyDoesn’t usually impact credit
Rewards/PerksOften offers rewards and benefitsLimited or no rewards
Liability for FraudLimited liability if reportedLimited liability if reported
Usage RestrictionsWorldwide, subject to credit limitWorldwide, subject to account balance
Cash WithdrawalCash advance, often with feesCash withdrawal from ATMs

Benefits of Credit Cards

Credit cards have many benefits, such as giving you more buying power, making payments easier, and helping you build a good credit history. They give you a safety net in case of an emergency, give you rewards like cash back or travel miles, and often give you extra insurance coverage for purchases. Credit cards also make it easier to buy things online and can help you build a good credit score.

Building Your Credit History:

  • Credit cards are one of the most important ways to build and improve your credit history.
  • A good credit score comes from using credit cards in a responsible way, like making payments on time and keeping balances low.
  • A good credit history is important for any future financial plans, like getting a loan to buy a house or car.
  • If you have a good credit history, you may be able to get better interest rates and borrow money easier.

Getting rewards:

  • Rewards: Credit cards often offer reward programs providing tangible benefits for spending.
  • Types of Rewards: These benefits may include cash back, travel miles, or redeemable points.
  • Purchase Redemption: Accumulated rewards can be utilized to purchase goods or services.
  • Optimizing Spending: Regular use of reward-earning credit cards maximizes benefits.
  • Balance Monitoring: Keeping track of credit card balances is crucial to outweigh interest charges.

Getting Cash Advances:

  • You can get a cash advance with a credit card.
  • Used as a short-term loan in times of need.
  • You can get cash from an ATM or a bank.
  • Cash advances usually come with high interest rates and fees.
  • This makes cash advances a costly way to borrow money.
  • Before getting a cash advance, it’s a good idea to look into other ways to get money.

Purchase Protection:

  • A lot of credit cards offer protection for things you buy with them.
  • This includes warranties that last longer and insurance against damage or theft.
  • Especially helpful for expensive purchases because it adds an extra layer of protection on top of the manufacturer’s warranty.
  • Before you make a purchase, you should read the terms and conditions of your credit card to find out how much purchase protection it offers.

Protection from Fraud:

  • Credit cards have strong protections against fraud to keep your money safe.
  • Issuers keep an eye on accounts to see if there are any strange or unauthorized transactions.
  • When fraud is suspected, issuers often let you know.
  • Most of the time, you won’t have to pay for fraudulent charges that were made without your permission.
  • This protection keeps your money safe, especially in a world that is becoming more and more digital.
  • It gives people peace of mind as digital transactions become more common.
BenefitCredit CardDebit Card
Build Credit ScoreHelps establish and improve credit history.No impact on credit score.
Rewards & PerksEarn cashback, points, travel perks, and more.Limited or no rewards available.
Emergency FundsProvides a line of credit in emergencies.Uses only available funds in linked account.
Fraud ProtectionGenerally offers robust fraud protection.Limited liability, may vary based on regulations.
Overdraft ProtectionN/APrevents overdrawing funds from linked account.
Online Shopping SecurityAdditional layer with virtual card numbers.Direct access to account funds for online purchases.
Travel BenefitsTravel insurance, rental car coverage, etc.Limited or no travel-related benefits.
Building Financial DisciplineRequires regular bill payments.Helps manage expenses with real-time deductions.
Credit Score ImpactUtilization affects score; responsible use key.No credit utilization; no impact on credit score.
Rental Car ReservationsOffers easier car rental reservations.Varies by rental company and policies.
Credit Card vs Debit Card

Benefits of Debit Cards:

There are many good things about debit cards that make them a popular way to pay for things. They make it easy to get access to money and let people spend only what’s in their bank accounts. Debit cards also get rid of the need to carry cash, make it easy to shop online, and encourage responsible spending by making it harder to get into debt.

Spending Only What You Have:

  • With a debit card, you can spend money from your bank account.
  • stops overspending and getting into debt.
  • Credit Card: Borrow money from the company that issued your credit card.
  • If the balance isn’t paid off in full, interest is added to it.
  • No interest is charged on a debit card.
  • Makes sure you only spend what you can afford.

Avoiding Interest Fees:

  • Since debit cards don’t have credit lines, you don’t have to pay interest on things you buy with them.
  • When you use a debit card, you use your own money. This keeps interest from building up.
  • Credit cards often have high interest rates, but people who use debit cards don’t have to worry about such fees.
  • Since you don’t have to pay interest, you can buy things without worrying about getting into debt or having to pay more in the long run.

Easy to Use:

  • Convenience: Debit cards are a convenient way to pay for many different things.
  • In-store and Online Purchases: You can use a debit card to buy things both in-store and online.
  • Bill Payments: You can also use them to pay your bills in an easy way.
  • Withdrawals from ATMs: People with debit cards can get cash from ATMs.
  • Simple Transactions: At the point of sale, all you have to do to use a debit card is swipe, insert, or tap.
  • Direct Access to a Bank Account: The money is taken directly from the bank account that is linked.
  • Debit cards can be used for many different kinds of financial transactions.
  • Everyday Spending: Because they are easy to use, they are a good choice for everyday spending.

No Annual Fees:

  • There are often no annual fees for debit cards.
  • There are no extra fees for payments and transactions that are done online.
  • With a debit card, you can get to your own money for free.
  • Ideal for saving money and avoiding fees that come with using a card.
  • Since there are no annual fees for debit cards, they are good for managing money well.

Drawbacks of Credit Cards:

Credit cards are useful, but they also have some problems. One big problem is that it’s possible to spend too much. Credit may tempt people to spend more than they can afford, which can lead to high-interest debt. Also, credit cards may have annual fees and interest on unpaid balances, which can put a strain on your finances if you don’t use them wisely.

Costs of interest:

  • When you use a credit card, you are borrowing money from the company that issued the card.
  • Credit card companies charge interest on the amount you borrowed, which is figured out as a percentage of the amount you still owe.
  • Depending on your credit score and the terms of your card, the interest rate can be anywhere from 10% to 25% or more.
  • If a balance is carried forward, even paying off the monthly balance won’t stop interest from being charged.
  • Accrued interest can add up to a lot, especially when interest rates are high.

Fees for late payments:

  • A late payment fee is charged if you forget to pay your credit card bill on time.
  • The fee is between $25 and $35.
  • You can avoid this fee if you pay on time.
  • If you miss payments often, you might have to pay late fees every month.
  • When payments are late, it hurts your credit score.
  • Make it hard to get loans or credit cards in the future.
  • cause it to be difficult to get credit.
  • Sending account to collection agency.
  • The credit score will be hurt even more.

Debt on credit cards:

  • Your credit card debt is the amount you owe on your credit cards.
  • When you have a lot of debt and high interest rates, it can hurt your finances a lot.
  • Credit card debt can make it harder for you to save money, pay your other bills, and plan for your financial future.
  • Emotional cost: Having a lot of credit card debt can make you feel stressed, worried, and sad.

Here are some additional drawbacks of credit cards:

  • Annual fees
  • Foreign transaction fees
  • Cash advance fees
  • Balance transfer fees
  • Fraudulent charges
  • Identity theft
AspectCredit CardsDebit Cards
OverspendingEasy to accumulate debt with high interest rates.Limited to available funds; no debt accumulation.
InterestHigh interest rates on unpaid balances.No interest on transactions; avoids debt.
FeesAnnual fees, late payment fees, cash advance fees.Minimal fees, often tied to specific services.
Credit ScoreImpacts credit score; misuse affects credit history.No impact on credit score; no credit history.
BorrowingProvides a line of credit for larger purchases.No borrowing; transactions use available funds.
RewardsRewards programs often accompanied by high fees.Limited rewards, typically tied to transactions.
SecurityVulnerable to fraud and identity theft.Less risk; transactions tied to available funds.
Credit CheckRequires credit check during application.No credit check required.
CashbackCashback offers might encourage unnecessary spending.No cashback incentives available.
Debt RiskHigh potential for accumulating unmanageable debt.No risk of accumulating debt beyond funds.
TravelForeign transaction fees and currency conversion.Same as credit cards, but more limited.
Credit Card vs Debit Card

Drawbacks of Debit Cards:

Debit cards are useful, but they also have some problems. They don’t have the same level of protection against fraud as credit cards, leaving users open to unauthorized transactions. Also, debit card disputes can take longer to settle, making it harder to get money right away. Overdraft fees and the possibility of losing money if money is stolen are also problems.

Overdraft Charges:

  • If you use your debit card to buy something but don’t have enough money in your account, the bank may let you do it but charge you an overdraft fee.
  • Most overdraft fees cost between $25 and $35 each time it happens.
  • Watch how much you spend to make sure you have enough money to pay for things.
  • Keep a good balance in your account.
  • Turn off overdraft protection if you want transactions to fail because you don’t have enough money in your account.
  • Keep in mind that giving up overdraft protection can be inconvenient and could mean you can’t buy things you need.

ATM Costs:

  • There are fees for using a debit card at an ATM that isn’t owned by a bank.
  • Most withdrawal fees cost between $1 and $5 per transaction.
  • Choose to use ATMs that your bank owns to avoid fees.
  • You can get cash out of ATMs in grocery stores and convenience stores without paying a fee.

Can go missing or be Stolen:

  • Risk of Loss or Theft: Debit cards can be lost or stolen, which means you need to take action right away.
  • Call the bank to report that the card was lost or stolen.
  • Bank takes away the card and gives a new one.
  • Unauthorized charges on a card that was lost or stolen may need to be paid.
  • When to report: The cost of unauthorized charges depends on when they are reported.
  • Within two days, report: Limiting liability to no more than $50.
  • After two days but before sixty days, report: A fine of up to $500 could happen.
  • After 60 days, you should: Full responsibility for any unapproved charges.

To avoid fraud, you should keep your debit card in a safe place and only use it at stores you know you can trust. You should also sign your card and keep the area where you write your name clean.

In addition to the problems listed above, debit cards also have the following problems:

  • They don’t offer the same level of fraud protection as credit cards.
  • They don’t help you build your credit history.
  • They can be inconvenient to use for large purchases.

Credit Card: Advantages and Disadvantages


  • Allows for purchases without immediate cash payment.
  • Responsible usage can improve credit score.
  • Offers cashback, points, or travel rewards.


  • Easy to overspend and accumulate debt.
  • Accrues interest if not paid in full each month.
  • Annual fees, late payment charges, and more.

Debit Card: Advantages and Disadvantages


  • Uses existing funds, preventing debt accumulation.
  • No interest charges, as it’s not a credit line.
  • Helps manage expenses with limited available funds.


  • Less protection against unauthorized transactions.
  • Doesn’t contribute to credit score improvement.
  • Usually lacks reward programs found in credit cards.

Credit Card vs Debit Card: Conclusion

Whether you use a debit card or a credit card depends on how much money you have and how you spend it. Walsh says that if you have trouble with spending, you should stick with a debit card. “The main idea is that when you pay with cash or a debit card, you subconsciously feel more pain because it is real and right in front of you,” he says. Also, if you already have a balance on a credit card, you should use a debit card.

“The interest rates on credit cards are usually very high, so it’s very expensive to carry a balance,” says Walsh. “Spending with a credit card not only makes it more likely that you’ll spend too much, but it also makes it hard to keep track of how much debt you’re paying off.” On the other hand, a credit card is the better choice if you can control how much you spend and how much debt you have. Just make sure that if you use a credit card for most of your purchases, you get the most out of it by keeping track of what you spend, planning how to use rewards, and avoiding fees.

Editorial Staff
Editorial Staff
The Bollyinside editorial staff is made up of tech experts with more than 10 years of experience Led by Sumit Chauhan. We started in 2014 and now Bollyinside is a leading tech resource, offering everything from product reviews and tech guides to marketing tips. Think of us as your go-to tech encyclopedia!


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