Debit card vs credit card: which to use and when
In short: a debit card spends money that is already in your bank account; a credit card borrows money that you pay back later, with interest if you don't pay the full statement balance. Credit cards usually give stronger protection against fraud and can build your credit history; debit cards make it harder to overspend but do not build credit.
The main difference
| Debit card | Credit card | |
|---|---|---|
| Whose money | Yours, from your checking account | The card issuer's, paid back later |
| Interest | None | Yes, unless you pay the statement balance in full |
| Builds credit history | No | Yes, if the issuer reports to credit bureaus |
| Risk of overspending | Lower (but watch overdraft fees) | Higher |
If your card is lost or used without permission
- Credit card: under federal law, the most you can owe for unauthorized charges is $50, and nothing if only your card number was stolen. Many issuers go further and charge nothing.
- Debit card: your protection depends on how fast you report it. Report within 2 business days of learning a card was lost or stolen and you owe at most $50; later, up to $500; and if you don't report unauthorized transfers within 60 days after your statement is sent, you could lose more.
The big practical difference: with a debit card, the missing money is your money while the bank investigates. Report a lost card or strange charge straight away.
When people often use each
- Debit: everyday spending when you want to stay within what you have; taking cash from an ATM.
- Credit: online shopping, travel bookings and building credit, paid off in full each month.
- Car rentals and hotels may place a hold of extra money on a debit card, which ties up your cash for days.
Watch the fees
Debit cards can trigger overdraft fees if you have opted in to overdraft coverage for card purchases. Credit cards can charge interest, late fees, cash advance fees and foreign transaction fees. Taking cash from a credit card at an ATM usually costs a fee plus interest from that day, with no grace period.
For more, see Credit card basics.
Handy tools
- Monthly budget planner: see what is left each month and how your spending splits up.
General information, not financial advice. Rules, fees and rates change and depend on your situation. Check with your bank, the provider or a qualified professional before you decide.
Sources
- CFPB: How are prepaid cards, debit cards and credit cards different?
- CFPB: Am I responsible for unauthorized charges if my credit cards are lost or stolen?
- CFPB: How do I get my money back after an unauthorized transaction?
- CFPB: Can I withdraw money from my credit card at an ATM?
- CFPB: How can I avoid debit card overdrafts?