What Is The Difference Between Credit Cards And Debit Cards?

October 26, 2015, Written By Jason Steele
Narrow focus of debit card with money

When you look at a debit and a credit card side by side, they can appear identical. Both will be the the same size, have the same number of digits, and will contain a logo identifying it with a major payment network such as Visa or MasterCard.

But that’s where the similarities will end. Credit and debit cards are very different forms of payment, and cardholders need to understand the how these products differ.

Receiving a card

To receive a credit card, you must first apply for an account with a card issuer. The card issuer will check your credit history and determine if you are a good risk to be granted a line of credit. In contrast, debit card users prepay their accounts, so there is no line of credit offered. Therefore, debit card accounts are normally approved to all applicants who are able to verify their identity.

Using these cards

When using a credit card, you can access a line of credit to make purchases, cash advances, or balance transfers. When making purchases, there is no typically no fee, but there will be a fee for cash advances and balances transfers with most credit cards. Each month, credit card users will receive a statement with a payment due date. Most cardholders can avoid interest charges on purchases by paying their entire statement balance in full and on time each month. But if you choose to carry a balance, you must still make a minimum payment and you will be charged interest on the remaining amount. Finally, interest is always charged on any cash advances from a credit card, even when the amount is paid in full on the next statement due date.

With a debit card, users must first pre-pay their account in some form. For example, debit cards that are linked to a bank account will only have access to the money in that account. In other cases, prepaid debit cards have their own accounts that must be funded with cash, direct deposit, or by other means. Once the available funds have been spent, any subsequent purchases will be denied until new funds are added. In contrast, credit cards will authorize purchases up to, and sometimes even above, the user’s credit limit.


Credit cards and debit cards also differ substantially on the fees they charge. While some reward credit cards charge an annual fee, most other cards do not. Instead, credit card issuers make money based on interest charges and fees for other services. These credit card fees can include cash advance fees, balance transfer fees, and foreign transaction fees. In addition, credit card users can also be charged penalties such as late payment fees.

When it comes to debit cards, the fee picture is more complex. While there are no cash advance fees, many debit cards will charge a fee for ATM access. Other debit cards can charge monthly maintenance fees, fees for adding funds, and fees for checking your balance or even for making a purchase. Finally, nearly all debit cards will impose foreign transaction fees on charges processed outside of the United States, even while many credit card issuers no longer do.

Rewards and benefits 

Another key difference between credit and debit cards is the ability to earn rewards for your spending. Many credit cards will offer cardholders rewards in the form of points, miles, and cash back. These rewards can even be offered to new cardholders as a sign-up bonus. In addition, credit cards can frequently come with perks such as travel insurance and purchase protection policies. Finally, credit cards co-branded with airlines and hotels may offer benefits such as free checked bags or room upgrades.

On the other hand, debit cards will have few, if any, benefits, and almost never offer any rewards. Some debit cards might feature some basic purchase protection or roadside assistance policies, but most don’t even offer those benefits.

Difference in fraud and dispute coverage

Credit card users are protected by the Fair Credit Billing Act, which prevents them from being charged more than $50 in the event of fraud. Yet in practice, nearly all card issuers waive this requirement by offering zero liability policies. In fact, credit cards will even offer protection in the event that your purchase is not received or what is received is not as it was described. In these cases, credit card holders have the opportunity to request a chargeback, which can result in an immediate reversal of the charge which becomes permanent when successfully documented.

Unfortunately, an unauthorized charge to your debit card can take longer to resolve, and there are fewer legal recourses available to debit cardholders who authorize charges, but do not receive what they paid for.

Impact on your credit

Since a debit card is not a loan of any sort, it has no impact on your credit. However, the use of a credit card will have substantial effects on cardholder’s credit. Each credit card account opened results in a record on the cardholder’s credit report, and the payment history and debt levels become very important factors in your credit score.

Once you understand the differences between debit and credit cards, you can choose the right kind of product for your individual needs.


The information contained within this article was accurate as of October 26, 2015. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.