Difference between Credit Cards and Debit Cards (Credit Cards vs Debit Cards)

Difference between Credit Cards and Debit Cards (Credit Cards vs Debit Cards)

The main difference between credit cards and debit cards is that credit cards allow users to borrow money up to a certain credit limit and pay it back over time with interest, while debit cards allow users to spend money they already have in their bank account.

Credit cards and debit cards are one of the most common forms of payment today. Despite their similarities, credit cards and debit cards have a few fundamental differences that can have a significant impact on your finances.

Credit cards and debit cards have made cash transactions a thing of the past and have become an integral part of our daily lives. We will explore the advantages and disadvantages of credit cards and debit cards, and their differences, in this article.

The Difference between Credit Cards and Debit Cards (Credit Cards vs Debit Cards)

What is a Credit Card?

A credit card is a payment card that allows you to borrow money from a lender to make purchases. You are essentially borrowing money with your credit card, which you will be required to repay with interest. When you use your credit card, you are taking out a loan.

In general, credit cards have a higher interest rate than other loans, such as personal loans or home equity loans. Any balance that you carry over from month to month will be subject to interest charges.

It is also possible for the credit card issuer to charge fees for services such as late payments, cash advances, and balance transfers.

You should read the terms and conditions of your credit card carefully, as the fees can add up quickly if you are not careful. To avoid paying interest and fees, you should pay your balance in full every month.

What is a Debit Card?

A debit card is a payment card that is linked to your checking account. When you use a debit card to make a purchase, the funds are deducted directly from your account. It is not possible to borrow money with a debit card, so you will not have to pay interest.

There may, however, be a fee imposed by your bank for using a debit card, such as an ATM fee or foreign transaction fee.

Compared to credit cards, debit cards offer several advantages. For example, they are more widely accepted because they do not require a credit check.

Furthermore, since you can only spend what you have in your account with a debit card, you can avoid overspending. Additionally, since there is no interest to pay, you can save money in the long run.

The Pros and Cons of Credit Cards


  1. Credit cards offer a convenient way to make purchases without carrying cash.
  2. You can earn rewards such as cashback or points for every purchase you make.
  3. Credit cards can help you build your credit score if you use them responsibly.
  4. You can borrow money for unexpected expenses or emergencies.
  5. Credit cards offer fraud protection, and you will not be liable for unauthorized purchases.


  1. Credit cards charge high-interest rates, and the fees can add up quickly.
  2. It is easy to overspend with a credit card, and this can lead to debt.
  3. If you miss a payment, your credit score will be negatively affected.
  4. It can be challenging to get approved for a credit card if you have a low credit score.
  5. You will need to pay an annual fee for some credit cards.

The Pros and Cons of Debit Cards


  1. Debit cards are widely accepted and can be used to make purchases online and in person.
  2. There is no interest to pay, and you can avoid debt by only spending what you have.
  3. You can withdraw cash from ATMs with your debit card.
  4. Debit cards are easy to obtain, and many checking accounts come with a debit card.
  5. Debit cards offer fraud protection, and you will not be liable for unauthorized purchases.


  1. Debit cards may have fees for certain transactions, such as foreign transactions or ATM withdrawals.
  2. If someone gains access to your checking account, they can potentially drain your entire account.
  3. Debit cards do not offer the same rewards or benefits as credit cards.
  4. If you overdraft your account, you may be charged an overdraft fee.
  5. Debit cards do not help build your credit score.

Difference between credit cards and debit cards

FeatureCredit CardDebit Card
Type of CardA loan that allows you to borrow money to make purchasesA card that allows you to spend money directly from your account
InterestCharged on the outstanding balanceNo interest is charged, as you spend your own money
Credit CheckRequired to qualify for a credit cardNot required, as it is linked to your checking account
Credit ScoreHelps you build your credit score when used responsiblyDoes not impact your credit score
FeesAnnual fee, late payment fee, cash advance fee, etc.May have some fees for certain transactions
RewardsCashback, points, airline miles, and other rewards programsNo rewards programs are available
Liability for FraudNot liable for unauthorized purchasesNot liable for unauthorized purchases
PaymentPaying monthly bill after the purchasesPaying immediately, as it withdraws money from the account
Overdraft ProtectionNot availableMay offer overdraft protection for a fee
Difference between Credit Cards and Debit Cards (Credit Cards vs Debit Cards)

Can I have both a credit card and a debit card from the same bank?

You can have both a credit card and a debit card with the same bank. There are many banks that offer both types of cards as part of their banking services. When you have both, you can manage your finances with flexibility and convenience.

You can use your debit card for everyday purchases and ATM withdrawals while using your credit card for larger purchases or to earn rewards.

Can I build credit with a debit card?

It is not possible to build credit with just a debit card. Debit cards are linked directly to your bank account, so you do not get credit. To build credit, you must use credit cards or other forms of credit that report your activity to credit bureaus.

However, if you use your debit card responsibly and maintain a positive banking history, this can be viewed positively by lenders when you apply for credit in the future.

Additionally, if you have a credit card, using your debit card to make timely payments can help you avoid overdraft fees and maintain a healthy financial history.

Can I use a credit card to withdraw cash from an ATM?

Cash can be withdrawn from an ATM with a credit card, but it is generally not recommended to do so. Cash advances are usually subject to a cash advance fee, which is a percentage of the amount withdrawn, along with higher interest rates than regular purchases.

Additionally, interest starts accruing immediately on cash advances, whereas, with regular purchases, you have a grace period to pay off the balance without accruing interest.

Credit cards should be used for cash advances only in emergency situations, and they should be repaid as soon as possible to avoid high-interest charges.

Can I use a credit card for international purchases?

A credit card can be used for international purchases, but you should make sure you are aware of any foreign transaction fees that may apply to your credit card.

A foreign transaction fee is a fee you are charged by your credit card company when you make a purchase outside your home country. These fees can add up quickly and increase the cost of your international purchases.

For international purchases, however, some credit cards do not charge foreign transaction fees, so doing your research is important to find one that suits your needs.

Also, if you plan to travel overseas, it is important to notify your credit card issuer so that your card will not be blocked.

How do I dispute a charge on my credit card?

If you notice an unauthorized charge on your credit card statement, or if you believe you were overcharged or charged for a service you didn’t receive, you can dispute the charge with your credit card issuer. To resolve the issue, contact the merchant first.

If they cannot, contact your credit card issuer and provide them with the details of the disputed charge, including the amount and date of the charge, as well as any relevant documentation.

It is important to act quickly when disputing a charge in order to ensure the best chance of resolving the issue. Your credit card issuer may issue a temporary credit while they review the matter.

What happens if I don’t pay my credit card bill on time?

You may be charged a late fee if you don’t pay your credit card bill on time and interest charges will accrue on your unpaid balance if you don’t.

It is possible that your credit card issuer will report the delinquency to the credit bureaus if you continue to miss payments, resulting in a negative impact on your credit rating.

If you miss multiple payments, your credit card issuer may send your account to collections and you could be sued for the outstanding debt. They may also raise your interest rate, revoke your rewards, or close your account.

What happens if I overdraft my checking account with a debit card?

It is possible for your bank to charge you an overdraft fee if you overdraft your checking account with a debit card.

Banks charge different fees for overdrafts and may charge as much as $35 or more for each overdraft. In addition to the fee, you will also be charged interest on the overdraft amount until it is cleared.

If you do not have overdraft protection or do not have enough funds in your account to cover the overdraft and fees, your debit card may be declined for future purchases until the balance is paid off. It is important to monitor your account balance to avoid overdrafts and incurring these fees.

Which one should you choose: Credit Cards vs Debit Cards?

Your financial situation and spending habits determine whether you should choose a credit card or a debit card. With a stable income and the ability to pay your credit card balance in full each month, you can enjoy a number of benefits, including rewards, fraud protection, and the chance to build your credit.

You may prefer a debit card if you tend to overspend or have a low credit score since you can only spend what you have available.

If you are considering a credit card, it is essential that you read the terms and conditions carefully to ensure that you understand the fees and interest rates associated with it.

Final Thoughts: Credit Cards vs Debit Cards

Credit cards and debit cards are both convenient payment options that have become an integral part of our daily lives. While they share some similarities, they have fundamental differences that can impact your finances.

It is important to understand the pros and cons of credit cards and debit cards and choose the option that works best for your financial situation and spending habits. With responsible use, both credit cards and debit cards can help you manage your finances and make purchases with ease.


  1. Barry Scholnick, Nadia Massoud and others, Journal of Banking and Finance, “The economics of credit cards, debit cards and ATMs: A survey and some new evidence“.
  2. Jonathan Zinman, Journal of Banking and Finance, “Debit or credit?“.
  3. Lloyds Bank, “The difference between credit and debit cards“.

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