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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.

Updated

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 cards
Debit cards
Earn rewards
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x
Make balance transfers
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x
No interest on purchases
Only if paid before the due date
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No ATM withdrawal fees
x
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Can build credit
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x
Premium perks
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Compare credit cards versus debit cards

Name Product Filter values Rewards Purchase APR Annual fee
Blue Cash Everyday® Card from American Express
2% at US gas stations and select US department stores, 3% at US supermarkets on up to $6,000 per year, then 1% after that and on all other purchases
0% intro for the first 15 months (then 13.99% to 23.99% variable)
$0
Get 3% cash back on groceries on up to $6,000 annually (then 1%) with no annual fee. This is a simple and effective rewards card. Rates & fees
Chase Freedom Flex℠
5% back in rotating categories up to $1,500 combined each activated quarter (then 1%), 5% on travel purchased through Chase, 3% on dining and drugstores, and 1% on all other purchases
0% intro for the first 15 months (then 14.99% to 23.74% variable)
$0
Get up to 5% cashback in rotating and newly added everyday categories. The refreshed Freedom Flex card has lots of earning potential.
Chase Sapphire Preferred® Card
5x points on Lyft, 2x points on travel and dining and 1x points on all other purchases
15.99% to 22.99% variable
$95
Earn a huge signup bonus worth $$1,000 with this popular travel card. Combine with other Chase Ultimate Rewards cards for even greater value.
Citi® Diamond Preferred® Card
N/A
0% intro for the first 18 months (then 14.74% to 24.74% variable)
$0
An impressive 18 months intro APR on balance transfers and purchases, as well as no annual fee make this one of the top 0% APR cards available.
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
0% intro for the first 12 months (then 13.99% to 23.99% variable)
$95
Perfect for families: Get up to 6% on everyday purchases and a welcome offer worth $250. This heavy-hitter rewards card has uncontested value. Rates & fees
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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
HSBC Premier Checking
$50 per month
Free to use at all ATMs in the US
$0
$0
0%
Get a 3% cash bonus, up to $600 (max. $100 per month) during first six months after account opening. Must open HSBC Premier checking account through offer page by September 30, 2020, and set up qualifying direct deposits into the new account. Conditions apply. Deposit products are offered in the US by HSBC Bank USA, N.A. Member FDIC.
Chase Total Checking
$12 per month
Access to 16,000 ATMs and nearly 4,900 branches nationwide
$0
$2.50 in the US, Puerto Rico and US Virgin Islands; outside the US, it's $5 per withdrawal and $2.50 per transfer or inquiry
3%
Get a $200 bonus when you open a new Chase Total Checking account and set up direct deposit within 60 days of opening your account. Chase's simplest checking account is easy to use and gives you access to 16,000 ATMs and nearly 4,900 branches. Available online nationwide except in Alaska, Hawaii and Puerto Rico.
Aspiration Spend & Save Account
$0 per month
55,000 free in-network ATMs
$0
$0
1%
A spend and save combo account with unlimited cash back rewards and deposits insured by the FDIC. The Aspiration Spend & Save Account is a cash management account offering of Aspiration Financial, LLC, an SEC-registered broker-dealer. Aspiration is not a chartered bank.
BBVA Online Checking
$0 per month
No ATM fees nationwide at more than 64,000 AllPoint, participating 7-Eleven and BBVA USA ATMs
$0
$3
3%
A full-service account with convenient, surcharge-free access to two massive ATM networks, plus a $200 signup bonus when you meet deposit requirements
HSBC Advance Checking
$25 per month
Surcharge-free HSBC ATMs nationally and internationally, plus up to four rebates a month for using non-HSBC ATMs in all US states except New York
$0
Up to four a month for using non-HSBC ATMs in all US states except New York
3%
Get up to $270 (max. $50 per month) for eligible new customers who open an HSBC Advance checking account. Conditions apply. Deposit products are offered in the US by HSBC Bank USA, N.A. Member FDIC.
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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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