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Credit Cards Vs. Debit Cards



A credit card provides an extension of money which you have to repay at a later time. It is not linked to a bank account, so no money will automatically be deducted. However, if payment is not made on time, interest and late fees can accrue. A debit card is linked to a bank account, and is similar to cash. When using a debit card, you may have the option to choose “debit” or “credit” at the point of sale. If you choose “debit,” you will need to use a PIN. If you choose “credit,” you can sign for the purchase, rather than using a PIN. Either way, money will be automatically deducted from your bank account.

There are other differences to consider, as well. Using a credit card allows you to build your credit. Credit cards also have more consumer friendly liability laws and more consumer protection on purchases. You do have protection if your debit card is lost or stolen, but you have to notify the bank within two days to get the maximum protection. After two days, your liability increases, and after 60 days, you could be liable up to your entire bank account balance. If you have a problem with a purchase that is made with a credit card, you have the option of disputing the charge with the credit card company. That option does not usually exist with a debit card.

If you have trouble keeping your spending within your means, a credit card may not be right for you. Even with a debit card, however, you will still need to keep track of your transactions to avoid spending more money than you have in your account.