What is the Difference Between a Credit card and a Debit card

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As technology advances, banking has been made easier. Thanks to the credit card and debit card options, we no longer have to wait in long queues inside a financial institution before we can withdraw money to attend to emergencies or to make payment to our loved ones and business associates.

But, asides from the general knowledge of credit cards allowing users to withdraw and borrow money from the card issuer and debit cards enabling one to withdraw the funds they had earlier deposited at the bank and in their savings account, what is the difference between debit card and credit card?

Before looking at the differences between a credit card and a debit card, let’s look at their definitions:

What is a Credit Card?

A credit card is a unique card issued by a financial institution which is typically a bank to a customer after the customer has been reviewed by the bank for creditworthiness. The card allows the cardholder to borrow funds from the financial institution, according to the institution’s terms and conditions which usually include an interest rate. Credit cards are issued in categories that enable the user to perform a specific action.

Examples Includes:

  • Standard cards
  • Premium cards
  • Rewards cards
  • Balance transfer cards
  • Secured credit cards
  • and charge cards.

The credit card option allows a cardholder to make purchases, make balance transfers, request cash advances from their financial institution, and enjoy benefits like concierge services, special event services, and more. Some even offer cash back and travel point access at a flexible interest fee with no annual or higher annual fees.

What is a Debit Card?

A debit card is a card issued by a financial institution(bank) to every customer. The card allows the cardholder to only withdraw funds from their account available at the bank with the use of a unique personification number(4-digit pin) recognized by the bank. The debit card allows the cardholder to withdraw money at ATMs, use the POS machines and make payments and purchases which of course is done with the use of the debit card.

The bank notifies the cardholder of every debit transaction within 24 hours and the cardholder is not given access to more funds after he has exhausted the money he deposited in his bank account.

However, some debit cards issued by major payment processors like Visa and Mastercard offer some consumer services.

The Key difference between a Credit card and Debit card

The Key difference between a credit card and a debit card is;

  • The debit card only allows a cardholder to make payments or withdraw cash from existing funds in their checking account while a credit card allows its cardholder to not only withdraw funds from its savings account but to borrow funds from the financial institution as well.
  • Debit cards are given to every financial institution’s customers but a credit card is given to a few customers after they have applied and have been checked for credit worthiness.

Listed below are several more differences between credit cards and debit cards.


Credit card offers several benefits to their users. Reward credit card holders are offered discounts, cash back on purchases,  travel points, and can reap cash. Premium credit card holders are offered concierge and special event services, enjoy cash advances, and can even make balance transfers.

Debit cards do not offer the Rewards benefits no matter how much you spend unlike credit reward cards unless you have a rewards checking account.

Credit cards also allow their users to build a credit history which is the first thing loan banks look at before granting a loan( to check how creditworthy you are and your ability to repay the money on time), therefore placing at a good advantage. Debit cards do not build credit histories.

Warranty and Purchase Protections

Some credit cards also provide warranties and insurance on purchased items that often go beyond what the seller or supplier is offering.

There is also the “Fair Credit Billing Act” which offers liability protection to credit card holders and allows them to dispute unauthorized purchases or goods purchased that have been damaged or lost during shipping.

Debit cardholders are not offered this benefit. Once payment has been made for a purchase via a debit card, the charge cannot be reversed by the bank unless the merchant does so.

Many credit cards go way out to provide some sort of car insurance that waives collisions. Debit cards do not allow this except there is a couple of money on the bank account associated with the debit card to act as a surety deposit.

Fraud Protection

There is also the protection offered to credit card users in instances where their card has been stolen or missing. Although, the same protection is given to debit card users- if only the cardholder reports within 48 hours of discovery. Payment processors like Visa and Mastercard offer debit card users better protection. Still, in most cases, credit card protection against theft is greater.

Once a debit card has been stolen, the likelihood of losing money is greater since the debit card is linked directly to a bank account while a credit card requires payment at a later date, giving the cardholder enough time to salvage the situation.

Interest and Fees

A credit card allows the cardholder to get a short-term loan while a debit card does not. This difference implies that for every loan, the credit card holder has to pay back the amount borrowed and with interest, although at a later date.

There are also the credit card charges of annual fee which is usually higher for some credit cards because of the rewards program involved,  a foreign transaction fee, a late payment fee for payment made after loan due dates,  balance a transfer fee, a cash advance fee( some credit cards charge a fee for withdrawing cash at even your bank’s ATM), and a returned-payment fee.

Debit cards do not have any associated fees attached to using them besides the initial debit card acquiring fee and an overdraft fee which is mainly attached to prepaid debit cards that have applied for overdraft. Debit cards do not charge any annual fees but there is the monthly maintenance fee which is, of course, a lesser amount, and foreign ATM charges which occurs if you use your debit card at another financial institution machine that isn’t your bank machine.

Final Thoughts

Credit cards and debit cards are developed to look the same and they have the same features: expiration dates, 16-digit card numbers, magnetic chips, and EMV strips but still, they are not identical in function. Their benefits and limitations differ.

Before deciding on whichever you would like to go for, knowing what each does,  their mode of operation, and how it will match with your needs is necessary.













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