Difference between Credit Cards and Debit Cards

Credit cards and debit cards have similar appearances, including 16-digit numbers, expiration dates, magnetic strips, and EMV chips. They both offer convenience for shopping in stores or online, but the main distinction is that debit cards use funds you have deposited, while credit cards allow you to borrow money from the issuer up to a limit. So, what is the difference between credit cards and debit cards?

You likely have a credit card and a debit card in your wallet. They provide convenience and protection, but they have significant differences that can impact your finances. Here’s how to choose the right one for your spending requirements.

Between Credit Cards and Debit Cards

FeatureCredit CardDebit Card
Source of FundsBorrowed money from the issuing bank up to a limitDirect access to funds in your bank account
Payment TimingPay later, typically with a monthly statementImmediate deduction from bank account
Impact on Credit ScoreAffects credit score; can build credit historyDoes not affect credit score
Interest ChargesApplicable if balance is not paid in fullNo interest charges
Rewards and BenefitsOften includes rewards like cash back, travel pointsGenerally offers fewer rewards
Purchase ProtectionAdditional protections like extended warranties and fraud protectionBasic fraud protection; limited purchase protection
Debt RiskRisk of accumulating debt if not managed properlyNo debt risk since using own money
FeesPossible fees: annual, late payment, foreign transactionPossible overdraft fees if account balance is exceeded
Credit BuildingCan help build or improve credit score with responsible useDoes not help in building credit
Emergency FundsCan be used as a financial safety netLimited to available account balance
Ease of BudgetingRequires discipline to avoid overspendingEasier to manage spending within available funds


Credit cards and debit cards have their own advantages and disadvantages. Credit cards are good for building credit, earning rewards, and protecting purchases, but they can lead to debt and interest charges. Debit cards give you instant access to your money without the risk of debt, making them great for budgeting and daily expenses, although they offer fewer rewards and protections. Knowing these distinctions can assist you in selecting the appropriate card for your financial objectives and spending patterns.