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

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What is the Difference Between a Credit Card and a Debit Card?

When you make purchases with a credit card, you’re borrowing money from your credit provider whereas with a debit card, you're using your own money.
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While you can use a credit card or debit card to pay for purchases in shops and online, there are some key differences that could help you save money. 

What is a credit card?

When you make purchases with a credit card, you’re borrowing money from your credit provider. You’ll have to repay this money in monthly installments along with interest. 

Credit cards also come with a credit limit that indicates the maximum amount of money you can spend. Some providers may charge you a fee if you go over your credit limit. 

There are different types of credit cards, such as:

  • Balance transfer credit cards - Move your balance to another card to save.

  • Rewards credit cards - Lets you earn rewards for purchases. 

  • Credit builder cards - Helps you build your credit score. 

  • 0% purchase credit cards - Has an interest-free period for a set time.

Interest and fees

As a credit card is essentially the same as a short-term loan, you will have to pay back what you spend, with interest. The fees and interest rates your credit provider charges are used to determine your annual percentage rate (APR). The higher the APR, the more you will pay every month.

Keep in mind that in addition to interest on your outstanding balance, you may also have to pay an annual fee, balance transfer fees, late payment fees, cash advance fees and transaction fees. 

What is a debit card?

When you use your debit card for purchases, you are using your own money. It comes from your bank account and you are not using credit that you have to repay every month.

Keep in mind that you can only use the money you have available in your account, and if you go below your available balance, you will be charged a fee as your account will be overdrawn. 

The benefits of a debit card

One of the main benefits of a debit card is that you won’t have any interest payments since you are using your own money in the bank. People tend to spend more when they are using credit - money they do not have - which is why a debit card is a smart way of spending money. 

Some debit cards also have card protection features, as companies like Mastercard and Visa are offering more fraud protection for its customers. It’s still important to let your credit card company know as soon as you realize fraudulent activity on your debit card to avoid losses as much as possible. 

Another benefit of a debit card is that it doesn’t have an annual fee, although you still have monthly maintenance fees, and transaction fees on purchases made.

When should you use a credit card?

There are certain times where it may be better to use a credit card instead of your debit card, especially if you are able to pay off your credit card balance in full to avoid interest charges. Let’s look at some reasons why it may be better to use your credit card for purchases.

Improve your credit score

Using your credit card often and repaying your balance in full every month is a good way to improve your credit record. Having a good credit score shows your lenders that you are responsible and can handle your debt very well. This can help you when you want to apply for more credit or even a mortgage.

Shop to earn rewards

Some credit cards reward you for spending, and this can be in the form of cashback or travel rewards. Every time you make purchases with your rewards credit card, you’ll earn points which can be exchanged for rewards like flights or shopping vouchers. The more you spend on your card, the more you earn - especially if you can clear your balance every month.

Book travel and holidays

Some hotels or car hire companies may only take credit cards for payments and bookings. This is where a credit card comes in very handy. Keep in mind that you may also have extra protection under Section 75; if you are incorrectly charged or unfairly debited for services you didn’t request, you can turn to your credit card company to help you fight it.

Pay for large purchases

Buying big ticket items can be very expensive but with a credit card you can split the total into more affordable monthly payments. Keep in mind that carrying a balance every month will incur interest charges, but if you can comfortably afford it, it’s a good way to spread out an expensive purchase cost. 

In addition to this, a credit card gives you more protection that a debit card does, as your card provider is jointly liable along with the retailer in the event that you are unfairly charged or the company goes bust. 

When is it better to use a debit card?

A debit card gives you quick access to funds from your current account and allows you to pay the bills, shop, and check your account balance. But when should you use a debit card over a credit card?

Reduce spending

Debit cards can prevent you from spending money you don’t have, as you don’t have a credit limit and can only spend the money available in your bank account. Using a debit card for your day-to-day shopping and account payments can help you to reduce your debt and save more in the end.

If you spend using a credit card, you may not keep track of your mounting debt, which is why a debit card is a safer way of paying for normal expenses and keeping your spending in check. 

Withdraw cash

Always withdraw money from a cash machine using your debit card. If you use your credit card, you may be charged a fee, and you’ll also be charged interest on the money you withdraw.


Do all credit cards charge interest?

Yes. Even though you may come across promotions like 0% interest credit cards, you will eventually pay interest on your balance that carries over from month to month. To avoid paying interest on your credit card, you should pay your balance in full every month.

Can I earn rewards with a debit card?

Not usually. Debit cards don’t earn rewards points or miles on purchases, although the account they are linked to may offer the account holder certain perks or benefits when they make a specified number of transactions. Some debit cards have a roundup feature where small amounts of money are transferred to a savings account automatically, to help you save. 

Can anyone get a credit card?

Although most people can apply for a credit card, not everyone is guaranteed approval. It depends on your credit history, along with an affordability assessment. If you have no credit history, or a bad credit score, you can consider applying for a secured credit card to help build up your credit score. 

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