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

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Illustration of hands holding debit and credit cards
The Balance / Theresa Chiechi . Photo:

The Balance / Theresa Chiechi 

Have you ever been confused about the difference between a credit and a debit card? It’s easy to see why. Debit cards and credit cards are accepted at many of the same places. They both offer convenience and eliminate the need to carry cash. They even look similar.

The fundamental difference between a debit card and a credit card account is where the cards pull the money. A debit card takes it from your banking account, and a credit card charges it to your credit line.

What Is a Debit Card?

Debit cards offer the convenience of a credit card but work differently. Debit cards draw money directly from your checking account when you make the purchase. They do this by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank, and it is transferred to the merchant's account. It can take a few days for this to happen, and the hold may drop off before the transaction goes through.


It’s important to keep a running balance of your checking account to make sure you don't accidentally overdraw your account. You can opt in with your bank to have overdrafts paid, but the charge will be rejected otherwise.

You will have a personal identification number (PIN) to use with your debit card at stores or ATMs. However, you can also use your debit card without a PIN at most merchants. You will sign the receipt like you would with a credit card. Below are some other facts regarding debit cards.

  • You won't pay interest on your purchases.
  • Your credit history will be unaffected by debit card spending.
  • Paying with debit will take the money from your account pretty much immediately.

What Is a Credit Card?

A credit card is a card that allows you to borrow money against a line of credit, otherwise known as the card’s credit limit. You use the card to make basic transactions, which are reflected on your bill; the issuer pays the merchant, and later, when you receive your bill, you pay the issuer.

You will be charged interest on your purchases if you carry a balance from month to month. Credit cards have high interest rates compared to most loans, and your credit card balance and payment history can affect your credit score.


Paying on time and in full will help you avoid interest and late fees and maintain or even improve your credit score.

Below are other facts about credit cards:

  • The bank decides your credit limit based on your credit history.
  • Generally, you no longer have to sign for in-person credit card purchases.
  • You will owe interest on your purchases if you don't pay them off when your bill is due and you don't have a promotional 0% APR interest rate.

Debit Cards vs. Credit Cards

Debit cards make it more difficult to overspend since you're limited to only the amount available in your checking account.

With a credit card, you run the risk of spending beyond your means. Just because your credit limit is $1,000 doesn't mean you can afford that sort of spending in your monthly budget.

Plus, debit cards offer the same convenience as credit without requiring you to borrow money or pay interest or fees on your purchases. Choosing debit is great for managing your money and helping you live within your means.

On the other hand, some credit cards offer additional insurance on purchases and can make it easier to request a refund or a return.


You should carefully read the disclosure information for your credit card to understand the benefits.

Finally, credit cards can help cover you in an emergency, giving you time to pay off your card before they add interest to your purchases. This safety net could be helpful if you find yourself needing to pay for something big before a check comes in but beware: Depending on credit for emergency spending sets you up for expensive interest if you can't pay in full by the due date. A better solution is to keep an emergency fund on hand, if you have the resources to do so.

Choosing the Best Card for the Situation

When trying to determine whether to use a credit card or a debit card, you should be honest with yourself and your ability to handle credit.

If you have spending issues, it is better to use your debit card whenever possible, to prevent yourself from falling into credit card debt.

Choosing the best card to use also depends on the purchase. Some rental car agencies and hotels make using a debit card impossible, or at least inconvenient. For example, non-airport locations may require utility bills, personal references, pay stubs, or other proof of ability to pay before they accept your booking. You may find using a credit card to be less of a headache.

Using a credit card might also be the better option if you want to take advantage of credit card reward programs. But this system only works in your favor if you pay off the balance in full each month.


If you find yourself carrying a balance, you may save in rewards, but you will wind up paying as much or more in interest.

If you're trying to build up your credit score, choose to use your credit card occasionally. Making charges and paying your bill on time will create a record of responsible, creditworthy behavior, which is reported to the credit bureaus and reflected on your credit report.

Fraud Protection

Identity theft and fraud are risks to guard against whether you choose debit or credit. That's why it's important to know what protections are included with your card.

If your credit or debit card information has been compromised, contact your bank immediately. Most banks have a 24-hour hotline you can call. The sooner you call, the better. You won't be liable for fraudulent charges made with your ATM or debit card after your report that it is missing or stolen. If someone uses your debit card before you report it lost or stolen, your liability varies depending on how quickly you report it:

  • Within two business days: Up to $50
  • More than two business days but up to 60 calendar days after your statement is sent to you: $500
  • More than 60 calendar days after your statement is sent to you: All of the money taken from your account

Thanks to the Fair Credit Billing Act, the most you'll be liable for if your credit card is stolen is $50. Just as with a debit card, you should immediately report the card as stolen by calling the card issuer.

After you report the missing card, follow up with a written statement by letter or email. Very carefully screen your account for charges you didn't make and report them to the bank.

Monitor your credit report to make sure that your identity was not stolen. If your credit card was compromised, you might even freeze your credit to help protect against further fraud.

Frequently Asked Questions (FAQs)

How can I tell the difference between a debit card and a credit card?

Credit cards and debit cards look very similar and have much of the same information on the front and back, so it's easy to confuse them. However, a debit card will say "debit" somewhere on the card, typically on the front, above the credit card number.

Is it better to use a debit card or credit card for certain transactions?

Certain companies, such as car rental companies or hotels, require credit cards to hold reservations. Some vendors, like gas stations, may have increased security risks, which makes a credit card a safer choice because it doesn't grant direct access to your bank account. Gas stations can additionally place holds on your card for more than your actual purchase, and it could take several days for the actual cost of purchase to be adjusted. If you want rewards, then you need to use a rewards credit card. In other cases, debit cards may help you avoid fees or overspending.

Can I use a debit card without a PIN?

Your bank will always require your personal identification number (PIN) when you withdraw money at an ATM. However, many merchants will allow you to charge a debit card as a credit card. When you do this, you'll have to sign for the transaction instead of entering your PIN.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer.gov. "Using Debit Cards."

  2. Consumer.gov. "Using Credit."

  3. FDIC. "When and Why Your Credit Card Interest Rate Can Go Up."

  4. Discover. "Discover Will No Longer Require Signatures at Checkout."

  5. Mastercard. "Mastercard Retires Customer Signatures."

  6. Michigan Department of Attorney General. "Credit Card vs. Debit Card—Know the Difference."

  7. Enterprise. "What Forms of Payment Are Accepted for Renting a Car?" Click "I will be renting at a non-airport location in the United States."

  8. Federal Trade Commission Consumer Information. "Lost or Stolen Credit, ATM, and Debit Cards."

  9. Federal Trade Commission. "Disputing Credit Card Charges."

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