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Credit cards vs. debit cards: what’s the difference?

Credit cards and debit cards might look similar, but they work in different ways – so it’s important to know which one to choose. Find out when it’s best to pay with a credit or debit card and get the lowdown on the pros and cons of each in our guide.

Credit cards and debit cards might look similar, but they work in different ways – so it’s important to know which one to choose. Find out when it’s best to pay with a credit or debit card and get the lowdown on the pros and cons of each in our guide.

Anelda Knoesen
From the Money team
3
minute read
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Posted 24 SEPTEMBER 2020

What’s the difference between a debit and a credit card?

The main difference between a debit card and a credit card is that when you pay with a debit card, you’re using money available in your bank account.

When you use a credit card, you borrow now and pay later - either all at once or in instalments.

Overall, credit cards can be good for making purchases as they offer you some protection if things go wrong - if an item isn’t delivered, for example. Debit cards are better for withdrawing cash and don’t usually involve taking on debt.

What are the benefits of a debit card over a credit card?

The advantages of a debit card can include:

  • Easier eligibility: almost everyone can get a bank account and, therefore, a debit card. If you’re not eligible for a standard current account, you can apply for a basic account. With a credit card, your application will be accepted or rejected based on your credit history.
  • Cash withdrawals: many ATMs let you take out cash from your bank account using your debit card without charging any fees or interest. If you use a credit card to withdraw cash, you’ll usually be charged interest immediately.
  • Less risk of debt: you can usually borrow more money with a credit card than you can with a bank overdraft, so sticking to a debit card could reduce the risk of your spending getting out of control.

What are the benefits of a credit card over a debit card?

The advantages of a credit card can include:

  • Spreading the costs of purchases: you can buy something today and pay for it over several months, making sure you’re paying at least the minimum payment each month.
  • Interest-free borrowing: many credit cards offer interest-free periods for balance transfers and purchases. As long as you pay off what you owe in full during that time, there won’t be any interest to pay.
  • Rewards: it’s worth checking if a credit card offers rewards, such as loyalty bonuses, air miles or even money off your weekly food shop.
  • Building your credit score: credit cards give you an opportunity to build up your credit score if you use them responsibly and keep up with your repayments.
  • Credit card purchase protection: purchases between £100 and £30,000 made with a credit card could be protected under Section 75 of the Consumer Credit Act if something goes wrong – for example, if what you bought isn’t delivered or if the company goes bust.

Is a credit card safer than a debit card?

It can be. If someone commits fraud using your debit card, the money will come straight from your account. You might not notice it when it’s happening and it may take time for the bank to reimburse you. But when you use a credit card, you’re spending the credit provider’s money and you’ll have the chance to spot any fraud when you get your statement. You can then flag it up to your provider before you make your payment.

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