Debit Card vs. Credit Card: Important Differences
5 Min Read | Last updated: January 7, 2025
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
See the difference between debit and credit cards. Review the pros and cons of debit cards vs. credit cards and see which one’s right for you.
At-A-Glance
- Credit cards and debit cards both may offer a convenient way to make purchases, but there are some important differences between these two cards.
- Credit cards can allow you to make purchases on credit and repay the amount later. Credit cards may also offer card-specific benefits, and rewards on eligible purchases.
- With debit cards, you can make purchases with funds that are already available in your bank account. Debit cards can have no risk of debt accumulation, but they may not offer as many benefits as credit cards do.
Credit cards and debit cards both can offer convenient ways to pay, but there are some important differences between them. In this article, we’ll examine these key differences, helping you make an informed decision about which option best suits your needs.
Debit Card vs. Credit Card: What’s the Difference?
When you use a debit card, funds are withdrawn from your bank account. This means that you may not be able to spend more than the available balance that’s in your account. The one exception to this would be if you have overdraft protection and spend more than you have available in your account.1 Because your debit card is connected to your bank account, you can also use it to withdraw cash, often for a small fee.
Credit cards are a revolving form of credit that you access when you conduct transactions with your credit card. You can access this credit over and over again, as long as you pay them back and spend within your credit limit. If you don’t pay your entire balance each month, you may incur interest charges on the portion of the balance that’s carried over. You can also use your credit card to get cash by taking out a cash advance, but this may involve more fees and expense than using a debit card.
Advantages of Credit Cards
Some credit cards have valuable rewards (and these cards may come with a higher annual fee), but even the most basic credit cards may come with benefits that debit cards don’t. When you’re exploring credit vs. debit cards, here are some reasons you might want to consider using a credit card:
- You Can Build Your Credit
First up, credit cards can help you build your credit over time. Responsible credit card use, like on-time payments and keeping a low credit utilization ratio, can build your credit score, which may in turn make it easier for you to do things like increase your credit limit, secure lower interest rates, or get a mortgage. - They Offer More Protection Than Debit Cards
If your credit card is used fraudulently, it may affect your card issuer more than you. When you have a credit card, you may not have to pay any more than $50 in fees if your card is used fraudulently.2 Additionally, many credit card companies may not charge card members at all. But if an unauthorized person gets ahold of your debit card and uses the card before you report it lost or stolen, what you owe depends on how quickly you report it.3 - You Can Earn Rewards
With a rewards credit card, you can get rewards for many everyday purchases. For every dollar you spend on eligible purchases, you may get cash back points or miles which you can then redeem. Some debit cards allow you to earn rewards as well, but this can be much less common. - Some Credit Cards Have Additional Benefits
Depending on the credit card, you could also benefit from certain types of rental car insurance, airport lounge access, concierge services, and even extended warranties on certain purchases. Not to mention, having a credit card can make it much easier to rent a car when you’re on a trip.
Advantages of Debit Cards
Despite the perks of credit cards, there may also many benefits of choosing a debit card, including:
- No Risk of Debt
With a debit card, there can be no risk of debt since you’re paying straight out of your bank account. This also means there can be no risk of interest accruing unless you go into overdraft. - It’s Cheaper to Withdraw Cash
It may be cheaper to withdraw cash with a debit card because there are no cash advance fees and interest charges to worry about, aside from potential automated teller machine (ATM) fees. - They’re Easier to Get
Debit cards may be easier to get than a credit card. All you need is a bank account, so there’s no need to apply or worry about being approved.
Benefits of Having Both a Credit and a Debit Card
Which option is best, credit cards or debit cards? It depends! For many purchases, using a credit card can offer several advantages, including security and purchase protection. Not to mention, a credit card can allow you to earn rewards on eligible purchases as well.
On the other hand, debit cards can offer advantages too, and they can come in handy in certain situations, for example, if you’re taking cash out. Because the risk of debt accumulation with a debit card is low, they can allow you to make purchases without having to worry about interest (aside from potential overdraft charges).
At the end of the day, many people find that having both credit cards and debit cards in their wallets may be the best solution. This gives them the flexibility, convenience, and security of multiple payment options and allows them to choose the best option for the situation at hand.
Did you know?
You can open up a Rewards Checking Account with American Express if you are an existing Card Member. This would allow you to earn points on eligible purchases with your debit card. To learn more, visit: American Express Rewards Checking.
The Takeaway
Although they might seem similar on the surface, debit and credit cards have some key differences. To determine which option’s right for you, you may want to consider your typical purchases, preferences, and financing needs.
1 “What is overdraft protection?,” Bankrate
2 “Know your rights when facing credit card fraud,” Bankrate
3 “Lost or Stolen Credit, ATM, and Debit Cards,” Federal Trade Commission Consumer Advice
Megan Doyle is a business technology writer and researcher whose work focuses on financial services and cross-cultural diversity and inclusion.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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