What’s the Difference Between Debit and Credit Cards?


Debit cards and credit cards have a lot of things in common. They look nearly identical, and both debit and credit cards can give you a fast and convenient way to pay—no matter whether you’re paying in person, online or over the phone.  

But they also have a number of key differences. And understanding those differences can help you maintain a healthy relationship with your finances.

Keep reading to learn about how debit and credit cards work and some main differences between the two. 

Key Takeaways 

  • Debit cards are linked to checking accounts and let people access their own money.
  • Credit cards are a type of revolving credit, which lets people borrow against a predetermined credit limit.
  • Credit cards can typically be used to build credit. 
  • Debit cards typically cannot be used to build credit.
  • There are other differences related to interest, fees, fraud coverage and rewards.

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What Is a Debit Card?

A debit card is linked to your checking account and allows you to use the account for purchases. Debit cards can also be used at ATMs for cash withdrawals and other transactions.

How Do Debit Cards Work?

Remember: Your debit card is linked to your checking account. So when you use your debit card to pay for something, you’re using money you already have—and funds are deducted directly from your bank account.

If you have enough money in your account when you use your debit card for a purchase, you should be good to go. If you don’t have enough money to cover a purchase, a few things could happen:

  • Transactions could be declined.
  • Transactions could be approved. And if you’ve linked your debit card to your savings account, your bank or credit union may automatically transfer funds to your checking account to make up the difference.
  • Transactions could be approved, but your bank or credit union may charge you an overdraft fee. Many banks and credit unions charge a fixed amount for overdraft fees, regardless of how much the transaction is. That means you could be charged even if you overdraw by just a penny. And as the Federal Trade Commission (FTC) explains, “Some banks might charge this fee for every purchase until you put enough money in your account to pay for the things you are buying.”

Capital One provides free overdraft protection and has eliminated overdraft fees. That means that even if you don’t enroll in overdraft protection, transactions that would overdraw your account will be declined and you won’t be charged any fees.

Pros of Debit Cards

There are perks to all different kinds of payment options—including debit cards. Here are a few benefits that come with using a debit card:

  • You can pay using money you already have—without carrying cash or having to write a check.
  • You can use your debit card at ATMs to get cash, make deposits, transfer money and check your balance.
  • When you use your debit card to make an in-store purchase, you can often get cash back as part of the transaction. And that can save you a trip to the ATM.
  • As the FTC explains, “You don’t pay extra money in interest when you pay with a debit card.”
  • Debit cards generally can’t hurt your credit.

Things to Keep in Mind With Debit Cards

Here are a few things to consider when it comes to using debit cards:

  • Liability for a lost or stolen debit card varies, depending on how quickly you report it. But some banks—including Capital One—offer $0 fraud liability if the card is lost or stolen.
  • Debit cards generally can’t help you build credit.

What Is a Credit Card?

In simple terms, a credit card allows you to borrow money in order to make purchases. Every time you use your card, you’re borrowing money from a line of credit.

How much you can borrow is referred to as your credit limit, which is typically based on multiple factors, including your creditworthiness. To help determine your credit limit, lenders typically look at things like your payment history, how often you’ve applied for credit and more. 

How Do Credit Cards Work?

As you use your credit card, your purchases add up. At the end of each billing cycle—usually every 30 days or so—you’ll receive a credit card statement telling you how much you’ve spent, how much you owe and when your payment is due. By paying your credit card bill, you’re paying back the money you borrowed.

If you pay your balance in full on or before your due date every month, you may be able to avoid paying interest.

If you’re not able to pay your balance in full, check how much the minimum payment is. It’s the smallest amount you can pay each billing cycle to keep your account current. Paying your minimum payment on time can help you avoid some potential consequences like late fees and penalties.

Keep in mind that if you pay only the minimum—or more than the minimum but less than your full balance—you may be charged interest on the unpaid portion of your balance.

Want to know more? Learn more about how credit cards work and how credit card interest works.

Pros of Credit Cards

Using your credit card responsibly can help you build a positive credit history and improve your credit scores or maintain good scores. And there are a lot of benefits to having good credit scores.

But building credit isn’t all that credit cards are good for. There are plenty of potential perks that come with using a credit card:

  • Credit cards can provide flexibility, allowing you to borrow money now and pay it back later.
  • Some cards let you earn rewards on the purchases you make. And depending on the type of rewards, you may be able to redeem them on things like travel, cash back, statement credits or gift cards.
  • Federal law provides consumers with some protections against unauthorized credit card use. But some issuers might provide more. For example, Capital One offers $0 fraud liability. That means you won’t be responsible for unauthorized purchases if your card is lost or stolen.* 
  • Some credit cards come with benefits provided by the payment networks. For example, some cards have travel benefits like insurance for lost luggage, coverage for trip cancellations or interruptions, and travel assistance services.
  • Your credit card statement can be a great way to track your expenses and help you budget.

Things to Keep in Mind With Credit Cards

Here are a few things to consider when it comes to using credit cards:

  • You could be charged interest if you don’t pay your balance in full every month.
  • There are a variety of potential fees associated with credit cards. Common credit card fees include annual fees and late fees, as well as fees for transactions like balance transfers and cash advances.
  • If you don’t use credit cards responsibly, you could hurt your credit. And a bad credit score can negatively impact applications for loans, housing, employment and more.

Is It Better to Use Credit or Debit?

Deciding between a debit card and a credit card depends on your personal needs and financial goals. And depending on your situation, it might be a good idea to have both. 

If you’re looking to limit your spending, a debit card can help you spend only what you already have. And while you should definitely stay on top of your account activity, debit cards don’t require you to pay a bill every month.

Credit cards, on the other hand, can provide flexibility and help you earn rewards on the purchases you make. And if you use credit cards responsibly, they can be a powerful tool for building your credit.

Is It Safer to Use Credit Cards or Debit Cards?

Both cards are generally safe options. And they each typically have security features. But features don’t guarantee protection, so it’s important to learn ways you can help protect your personal information.

In cases where fraud does occur, credit cards may offer slightly more protection. For fraudulent charges made with a lost or stolen credit card, you can be liable for:

  • $0 if you report the card lost or stolen before it is used fraudulently.
  • Up to $50 if you report the card lost or stolen after it has been used.

With lost or stolen debit cards, you can be responsible for:

  • $0 if you report the card lost or stolen before it’s used fraudulently.
  • Up to $50 if you report the card lost or stolen within two business days.
  • Up to $500 if you report the card lost or stolen after two business days, but within 60 days of your account statement. 
  • All the money that was taken from you if you pass that 60-day mark.

If your account number was used, but your credit or debit card wasn’t stolen or lost, you shouldn’t be on the hook for the lost amount. But with debit cards, you must report the fraudulent activity within 60 days of your statement date in order to avoid liability for your loss.

In order to minimize your liability for both, the FTC recommends that you report any lost or stolen credit or debit card as soon as possible and watch your account for fraudulent charges. 

The Difference Between Credit Cards and Debit Cards in a Nutshell

The main difference between credit cards and debit cards comes down to whether you’re borrowing from a line of credit or using your own money. 

Credit cards charge you interest and other fees for borrowing money, whereas your debit card might only incur fees if you overdraft your account. There are also differences in how federal fraud protections work. 

If you’re ready to explore your credit card options, you could start by comparing credit cards from Capital One. And if you’re interested in applying, it might be worth checking to see if you’re pre-approved for any offers.


*Claims of unauthorized use or for $0 Fraud Liability are subject to verification and investigation.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

Capital One does not provide, endorse or guarantee any third-party product, service, information, or recommendation listed above. The third parties listed are solely responsible for their products and services, and all trademarks listed are the property of their respective owners.

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