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What is the difference between a debit card and a credit card?

You can spend your own money or borrow it from a bank.

The main difference between a debit card and a credit card is where the money comes from. When you make a purchase with a debit card, the money is pulled from your checking account, which is your own money. When you make a purchase with your credit card, the money is borrowed from your bank, which you have to repay before a specified due date.

What is a debit card?

A debit card is a replacement for cash. When you use it, you are pulling your own funds from your bank account.

This way, you don’t accrue interest on your purchases, making a debit card a solid option if you’re trying to avoid interest and stay clear of debt.

What is a credit card?

A credit card is a payment tool that lets you borrow money from your bank every time you make a purchase. Because of that, you have access to a pool of money that isn’t yours, and you’ll have to repay the borrowed amount within a grace period, usually between 21 and 25 days.

If you fail to pay on time, expect to accrue penalty fees and interest, which makes your purchases more expensive than they actually are.

Pros and cons of using a credit card vs debit card

Despite being similar payment methods, each has its own perks and downsides. For example:

Credit cardsDebit cards
Earn rewardscheckmarkx
Make balance transferscheckmarkx
No interest on purchasesOnly if paid before the due datecheckmark
No ATM withdrawal feesxcheckmark
Can build creditcheckmarkx
Premium perkscheckmarkx

Compare credit cards versus debit cards

Name Product Filter values Rewards Purchase APR Annual fee
Blue Cash Everyday® Card from American Express
3% at US supermarkets on up to $6,000 per year (then 1%), 2% at US gas stations and select US department stores and 1% on all other purchases (redeem as statement credit)
0% intro for the first 15 months (then 13.99% to 23.99% variable)
$0
Earn up to $250. You'll get 20% back on Amazon.com purchases in the first six months for up to $150 back, and $100 after you spend $2,000 in the first six months. This is a higher-than-average welcome offer for a card with no annual fee. Terms apply, see rates & fees
Blue Cash Preferred® Card from American Express
6% on select US streaming services, 3% on transit and US gas stations, 6% at US supermarkets on up to $6,000 annually, then 1% after that and on all other purchases (redeem as statement credit)
0% intro for the first 12 months (then 13.99% to 23.99% variable)
$0 intro annual fee for the first year ($95 thereafter)
Earn up to $350. In your first 6 months, you can earn a $150 statement credit when you spend $3,000, and earn 20% back on Amazon purchases made with your card, up to $200 total. Having 6 months to earn a welcome offer is a rare benefit as most cards give you only 3. Terms apply, see rates & fees
TD Double Up℠ Credit Card
Up to 2% cash back. 1% cash back on purchases plus 1% when you redeem into an eligible TD Bank Deposit Account
14.99%, 19.99% or 24.99% variable
$0
Earn up to 2% cash back. 1% cash back on purchases plus 1% when you redeem into an eligible TD Bank Deposit Account. Available in: CT, DC, DE, FL, MA, MD, ME, NC, NH, NJ, NY, PA, RI, SC, VA, VT
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Compare up to 4 providers

Name Product Fee ATMs ATM transaction fee Out-of-network ATM fee ATM fee rebates Foreign transaction fee
Aspiration Spend & Save Account
From $0 per month
55,000 free in-network ATMs
$0
$0
1%
Deposits are fossil fuel-free and insured by the FDIC. Enjoy a spend and save combo account with unlimited cash back rewards and a $100 bonus when you spend $1,000 in your first 60 days.
Chime Spending account
$0 per month
60,000+ fee-free ATMs
$0
$2.50
0%
Get rid of fees with this financial app offering consumer-friendly accounts. Chime can also help you save easily and access your paycheck faster.
Lili
From $0 per month
32,000 fee-free ATMs nationwide
$0
$2.50
0%
Freelancers get paid up to two days early and can automatically set aside money for taxes with the Lili digital bank account
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Compare up to 4 providers

Debit cards vs. credit cards

Debit cards have some similarities to credit cards. Debit cards, like credit cards, have a 16-digit account number and expiration date and a 3-digit security code. However, there are some major differences between credit and debit cards that will help you decide which of these cards should be your primary card.

  • Debit cards are funded by money in a checking account, while credit cards are linked to a line of credit. Your debit card purchases are deducted from your checking account balance. Each debit card purchase reduces your checking account balance and leaves you with less money for additional purchases. When you make debit card purchases, you’re not creating any debt. Your credit card, on the other hand, is linked to a credit line. Your purchases are added to a credit card balance that must be repaid.
  • Debit cards do not require monthly minimum payments. Since your debit card purchases are paid from the money in your checking account, you don’t have to make any monthly payments on your debit card. You may have to maintain a minimum balance to avoid a monthly fee, but a minimum balance is not a requirement. Credit card balances do require monthly minimum payments. Failing to make the minimum required payments can result in late fees, higher interest rates, and damage to your credit.
  • Debit card purchases aren’t subject to interest. Because you’re not borrowing money, there is no finance charge associated with your debit card purchases. In fact, depending on your checking account, you may actually earn interest on your checking account balance. Credit cards do charge interest on balances you carry unless a promotional rate is in effect.
  • Debit card usage won’t affect your credit. Your debit card and checking account usage is not routinely reported to the credit bureaus and is not included in your credit score. This means you can’t build credit with a debit card. Credit card usage, on the other hand, directly impacts your credit score. Handling credit cards responsibly is important for maintaining a good credit score. There is one exception: if your debit card purchases exceed the balance in your checking account and you fail to clear up the balance, your bank may report the outstanding balance to the credit bureaus.
  • You can increase your own spending limit. With a debit card you can spend as much money as you have available in your checking account. Depositing more money will allow you to spend more. With a credit card, you can only spend up to the credit limit your credit card issuer loans you. To increase your spending ability, you’ll have to wait for your credit card issuer to raise your credit limit.
  • Cash withdrawals are less expensive with a debit card. When you use your debit card to withdraw money at the ATM, you face a maximum of two ATM fees: one from the ATM operator and one from your bank. When you use your credit card to withdraw cash at the ATM, not only are you subject to an ATM fee but you will also have to pay a cash advance fee and your cash advance balance may be charged a higher interest.

Should I use my debit or credit card?

  • If you don’t care about a credit score and you don’t want to pay with money you don’t have — a debit card is the way to go. Plus, if you often travel abroad, a debit card is ideal for ATM withdrawal because you won’t pay an ATM withdrawal fee.
  • On the other hand, if you want to build credit and potentially earn rewards on your purchases — a credit card may be the right choice. Just make sure to pay your balance on time, otherwise, it’ll cost you more than it’s worth.

Bottom line

A debit card lets you spend the money you have in your account instead of carrying cash, while a credit card lets you borrow money from the bank, which you will have to repay on time to avoid paying fees and interest.

But before committing to either of these payment methods, make sure you compare your options to make the right choice.

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