Credit Cards and Debit Cards - Key Differences
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The Difference Between a Credit Card and a Debit Card



Have you ever been confused about the difference between a credit and a debit card? It’s easy to see why. The differences between a credit card and a debit card are more than you can think of. Even though both cards often look the same, have many similar functions.

Credit Cards and Debit Cards

However, they also have a number of key differences. And understanding those differences can help you maintain a healthy relationship with your finances. Read on to learn about how debit and credit cards work and some key differences between the two.


Credit cards and debit cards typically look almost identical, with 16-digit card numbers, expiration dates, magnetic strips, and EMV chips. Debit cards and credit cards both offer a convenient way to pay without cash or checks, and both are accepted in nearly all the same places. But that’s where the similarities end.

The fundamental differences are where the money comes from, and what it can cost. Both debit and credit cards can be used to make purchases, but the way payments are processed varies based on the type of card you use.

When you make a purchase with a debit card, you will often have the choice to choose a “debit” or “credit” transaction. This determines how much payment processors charge, how long it takes for money to move, and other things that impact both retailers and customers.


Credit Cards vs Debit Cards – Overview

Both can make it easy and convenient to make purchases in stores or online, with one key difference. Debit cards allow you to spend money by drawing on funds you have deposited at the bank. Credit cards allow you to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash.

Many debit cards and credit cards have similar features. Typically, both cards carry the logo of a major credit card company, such as Visa or Mastercard, and both can be swiped at retailers to purchase goods and services. A debit card, however, uses funds from your bank account. A credit card uses a credit line that can be paid back later, which gives you more time to pay. A customer’s credit line depends on their creditworthiness, and they can decide how and when to spend the line of credit and are usually billed on a monthly cycle.

To sum up, the major difference is that with a credit card, the bank lends you money to use which you can use, and pay them back with interest on a monthly basis. Whereas, with the debit card, you are spending the money which you already have.

In order words, debit cards are linked to your bank account, so every time you make a purchase, the amount is automatically deducted from your account. Credit cards give you access to a line of credit that lets you borrow money for purchases and repay it later.

What is a Credit Card?

A credit card is a payment card issued by a financial institution, typically a bank to users (cardholders) to enable the cardholder to borrow funds from that institution. Moreover, it enables the user to pay a merchant for goods and services based on the cardholder’s accrued debt (i.e., promise to the card issuer to pay them for the amounts plus the other agreed charges).

Moreover, the card issuer (usually a bank or credit union) creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment to a merchant or as a cash advance.

With most credit card companies, a customer has 30 days to pay before interest is charged on the outstanding balance, though in some cases, interest starts accruing right away. Moreover, interest rates on credit cards can be notoriously high; they are a chief way credit card companies make money. Savvy consumers can avoid paying it by settling their balance in full each month.

Specialized Types

Furthermore, credit cards are issued in the following variety of categories:

  • Standard cards simply extend a line of credit to their users for making purchases, balance transfers, and/or cash advances and often have no annual fee.
  • Premium cards offer perks such as concierge services, airport lounge access, special event access, and more, but they usually have higher annual fees.
  • Secured credit cards require an initial cash deposit that is held by the issuer as collateral.
  • Rewards cards offer cash back, travel points, or other benefits to customers based on how they spend.
  • Balance transfer cards have low introductory interest rates and fees on balance transfers from another credit card.
  • Charge cards have no preset spending limit but often don’t allow unpaid balances to carry over from month to month.

Pros and Cons of Using Credit Cards

Below are other facts about credit cards:


  • Build credit history: Credit card is reflected on your credit report. That includes positive history, such as on-time payments and low credit utilization ratios, as well as negative items such as late payments or delinquencies. Your credit report information is then used to calculate your credit scores.
  • Fraud protection: Credit cards offer much greater protection than debit cards in most cases. As long as the customer reports the loss or theft in a timely manner, their maximum liability for purchases made after the card disappeared is $50.
  • Warranty and purchase protections: Some credit cards may also provide additional warranties or insurance on purchased items that go beyond those the retailer or brand is offering. If an item bought with a credit card becomes defective after the manufacturer’s warranty has expired, for instance, it is worth checking with the credit card company to see if it will provide coverage.


  • Interest and fees
  • Spending can lead to debt
  • Credit score impact

What is a Debit Card?

A debit card (also known as a bank card, plastic card, or check card) is a payment card that can be used in place of cash to make purchases. It is similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardholder’s bank account at the time of purchase and is immediately transferred directly from that account to the merchant’s account to pay for the purchase.

A debit card is linked to an individual’s checking account and can be used anywhere credit cards are permitted. If your debit card has a Visa logo, for example, it can be used anywhere that takes Visa. Moreover, when you use a debit card, the bank places a hold on the amount you have spent. Depending on the purchase amount and your bank, the money will go immediately out of your account or be held by the bank for 24 hours or longer.

You will have a personal identification number (PIN) to use with your debit card at stores or ATMs. You can use your debit card to withdraw cash from your checking account using the unique personal identification number (PIN). When you use your debit card for a purchase, you may be asked for your PIN, or you may be asked to sign for the purchase, similar to a credit card.
However, you can also use your debit card without a PIN at most merchants. You will sign the receipt like you would with a credit card.

Pros and Cons of Using a Debit Card

Below are some other facts regarding debit cards.


  • Avoid debt
  • Fraud protections
  • No annual fee


Just like credit cards, the major drawbacks of using debit cards involve credit score impacts and cost.

  • No rewards
  • Doesn’t build credit
  • Fees

Credit Cards vs Debit Cards – Key Differences

When you use a debit card, the money is automatically taken out of your checking account. When you use a credit card, you pay the bill later. You can’t use your debit card if your bank account is empty, but you can use a credit card. Besides, credit cards can help you build up your credit or hurt it.

Debit cards make it more difficult to overspend since you’re limited to only the amount available in your checking account. But with a credit card, you run the risk of spending beyond your means. Just because your credit limit is $1,000 doesn’t mean you can afford that sort of spending in your monthly budget.

Moreover, debit cards offer the same convenience as credit without requiring you to borrow money or pay interest or fees on your purchases. Choosing debit is great for managing your money and helping you live within your means.

On the other hand, some credit cards offer additional insurance on purchases and can make it easier to request a refund or a return. However, many companies are reducing or withdrawing these benefits.

However, if someone steals your debit card and takes funds out of your account, it may be more difficult and take longer to get the funds back than if someone steals your credit card. In that case, you can report the card stolen, and your liability is limited.

Finally, credit cards can help cover you in an emergency, giving you a month to come up with the cash before the bill comes due. This safety net could be helpful if you find yourself needing to pay for something big before a check comes in but beware: depending on credit for emergency spending sets you up for expensive interest if you can’t pay in full by the due date. A better solution is to keep an emergency fund on hand.

Credit Cards and Debit Cards – FAQs

What’s the main difference between a credit card and a debit card?

The main difference between the two cards is the question, “Do you want to pay now or later?” A debit card is tied to your checking or savings account, and when you use it, funds are removed within 24 hours from your account. A credit card can be used to immediately pay for goods and services, but you pay for them when your monthly billing cycle is due.

How can I tell the difference between a credit card and a debit card?

Credit cards and debit cards look very similar and have much of the same information on the front and back. Therefore,  it’s easy to get confused with them. However, a debit card will say “debit” somewhere on the card, typically on the front, above the credit card number.

Read Also:

Which is better, a credit card or a debit card?

Certain companies, such as car rental companies or hotels, require credit cards to hold reservations. Some vendors, like gas stations, may have increased security risks. Which makes a credit card a safer choice because it doesn’t grant direct access to your bank account. And, if you want rewards, then you need to use a rewards credit card. In other cases, debit cards may help you avoid fees or overspending.

However, each card has its own uses and benefits depending on the individual. For instance, you may want to consider a credit card for larger purchases. But only if you know, you can pay your bill on time. If you need cash, it is less expensive overall to use your debit card rather than take out a cash advance on your credit card. When you pay with cash, you don’t go into debt, which is a risk when you use a credit card.

Furthermore, credit cards are useful in an emergency at home and abroad. If you have a line of credit at your disposal. You can make an emergency payment without worrying about the money going out of your bank account. Besides, most car rental companies, hotels, and resorts will only accept a credit card on file versus a debit card when you travel.


All credit cards are debt instruments. While a debit card is simply a tool to use in place of a check or actual cash. You are borrowing money when you use a credit card. When you use a debit card, you are using your funds.

To sum up, there isn’t necessarily a better card to use. Using credit versus using a debit card, which is essentially cash. Completely depends on how you want to spend and manage your money.

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