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

This question is about Credit Cards

WalletHub, Financial Company

@WalletHub 03/18/20 First posted on 08/15/16
Last reviewed on 03/18/20

The main difference between debit cards and credit cards is that a debit card is linked to a checking account, while a credit card is linked to a line of credit. When a purchase is made with a debit card, the funds immediately come out of the bank account. When a purchase is made with a credit card, it is “charged” to the credit line to be repaid later.

There are plenty of other differences between the two payment methods. Here are some of the biggest differences between credit cards and debit cards:

Using a credit card builds credit; using a debit card won’t. Credit cards report account information to the major credit bureaus each month, allowing users to build a track record of responsible borrowing. Debit cards are not included on credit reports.
Credit cards give rewards; debit cards generally don’t. Many credit cards give cash back, points or miles in return for each dollar in purchases charged to the card. Some credit cards even have initial rewards bonuses for spending a certain amount within a few months of opening an account. Most debit cards don’t give rewards for purchases – though you can get some nice checking account signup bonuses.
Debit card fraud is more of a headache than credit card fraud. All four major credit card networks – and all 3 debit card networks – have a $0 fraud liability guarantee. But credit card users have time to spot and handle the fraud before they pay the bill, while debit card users pay for fraudulent transactions at the time of purchase. So even though cardholders usually aren’t liable for fraud on either type of card, it may take a while for debit card users to get their money back, while credit card users won’t ever lose the money. Plus, debit card protections are not as favorable if a PIN is used to complete the fraudulent purchase.

Credit cards and debit cards may not look very different. Both debit and credit cards have a card network logo – and these days, both come with an EMV chip on the front for an extra layer of security when making transactions. But they are quite different in practice.

In fact, the differences are big enough to make an impact in the lives of those who use them. Generally, credit cards are better in fraud cases and to build credit, but they also have their downsides. Debit cards give users peace of mind knowing they won’t spend more money than they have, but they also won’t earn rewards or build credit.

2021's Best Credit Cards

Compare Cards

People also ask

Can you pay a credit card with a debit card?

You cannot pay a credit card with a debit card. But you can a pay a credit card with the bank account that a debit card is linked to, by doing an electronic transfer. However you choose to pay your credit card bill – whether you do it online, over the phone or by mail – there will not be an option to enter any kind of card number as the payment method. That’s among the reasons why you can’t pay one credit card’s bill with another credit card, either.… read full answer

To pay your credit card bill using the checking/savings account behind your debit card, you’ll usually need to enter information like the account number and routing number for your checking or savings account. This is the most common way people pay their credit card bills, and it lets you take the money straight from your bank account and apply it to your bill.

Once you’ve entered the info for the account you’d like the money to come from, you can usually save that for next time so you don’t have to manually enter it every month. You can also set up automatic bill payment, so that on the same date each month, money is withdrawn from your account to pay your credit card bill.

show less

Should I use a charge card or a debit card?

There are benefits to using both charge cards and debit cards. Charge cards allow you to build credit history and do not require immediate payment for purchases, which provides both flexibility and added protection from fraud. You must simply pay your balance in full at the end of each month in order to retain purchasing privileges and avoid late fees.… read full answer

Additionally, charge card accounts provide far more lucrative perks and rewards than do debit cards. The only benefit that a debit card has over a charge card is that it makes it impossible to spend more than you can afford. Therefore, you should only use a debit card if you seek this type of inherent discipline.

show less

Are there different types of cash back credit cards?

There are 3 types of cash back credit cards: flat-rate cash back cards, cash back credit cards with tiered rewards, and cash back credit cards with bonus categories that change.

Each type is good for different styles of spending. With a bit of organization, the right combination of these types of cash back cards could also help you maximize your rewards-earning potential.… read full answer

3 Types of Cash Back Credit Cards:

Flat-rate cash back credit cards give cash back rewards at a single rate for all purchases. The best flat-rate cash back cards offer at least 1.5% cash back on all purchases, plus a signup bonus, with no annual fee.

Tiered cash back credit cards give cash back rewards at different rates depending on the amount spent over a given interval, or based on whether a purchase qualifies for a set group of bonus categories that does not change. For instance, a tiered cash back credit card might offer 2% cash back on all purchases, up to $10,000 spent in a year, and then give 1% cash back on all other purchases for the rest of the year. Or, another type of tiered cash back credit card might offer 4% back on grocery store spending, 3% back for restaurant purchases, and 1% back on everything else.

Bonus category cash back credit cards give higher cash back earning rates on specific types of purchases, which may include purchases from certain retailers or purchases that fit a certain theme. The types of purchases that qualify for bonus cash back usually change once per quarter. For example, cardholders might earn 5% cash back on bonus-category purchases, up to a quarterly spending limit, and 1% back on all other purchases. Bear in mind that some credit cards using bonus categories for cash back will require cardholders to activate the new categories every quarter, which can be a hassle.

Knowing which type of cash back credit card is right for you is a matter of how you spend your money, so it’s good to consider how likely you are to organize your spending around categories. If you’d rather not worry about spending categories or using different cards for different types of purchases, a flat-rate cash back card is what you want. On the other hand, if you don’t mind activating spending categories each quarter, you could benefit from a bonus category cash back credit card.

If you can handle more than one credit card, however, your options grow. You could use one tiered card for groceries only, for example, a bonus category card for different rewards-rich opportunities, and a flat-rate cash back card for everything else. A mixture of cash back credit card types can get you to another level of rewards, but only if you’re able to use several credit cards responsibly.

show less

WalletHub Answers is a free service that helps consumers access financial information. Information on WalletHub Answers is provided “as is” and should not be considered financial, legal or investment advice. WalletHub is not a financial advisor, law firm, “lawyer referral service,” or a substitute for a financial advisor, attorney, or law firm. You may want to hire a professional before making any decision. WalletHub does not endorse any particular contributors and cannot guarantee the quality or reliability of any information posted. The helpfulness of a financial advisor's answer is not indicative of future advisor performance.

WalletHub members have a wealth of knowledge to share, and we encourage everyone to do so while respecting our content guidelines. Please keep in mind that editorial and user-generated content on this page is not reviewed or otherwise endorsed by any financial institution. In addition, it is not a financial institution’s responsibility to ensure all posts and questions are answered.

Ad Disclosure: Certain offers that appear on this site originate from paying advertisers, and this will be noted on an offer’s details page using the designation "Sponsored", where applicable. Advertising may impact how and where products appear on this site (including, for example, the order in which they appear). At WalletHub we try to present a wide array of offers, but our offers do not represent all financial services companies or products.

Ask a Question

140

Ask Question

WalletHub Transparency

We are committed to being fully transparent with our readers. Opinions expressed here are the author’s and/or WalletHub editors'. WalletHub editorial content on this page is not provided, commissioned, reviewed, approved or otherwise endorsed by any company. In addition, it is not any company’s responsibility to ensure all questions are answered.