A young African American man uses his credit card to make a purchase on the phone

Both debit and credit cards play a vital role in today’s financial landscape. Your best bet is to have one of each but it can be confusing trying to figure out when to use which card.

Luckily, once you’ve learned the difference between a debit and credit card, you’ll be all set to get the most out of both. Read on to make sure you always pull the right card out of your wallet!   

Key Differences Between Debit and Credit Cards

The line between debit and credit cards used to be very clearcut. These days, debit cards may offer some of the benefits of a credit card but there are still important differences between the two.

Debit Cards

  • You draw on funds you have in your checking account. 
  • Your card is usually free but your checking account may have a monthly service fee.
  • If you don’t have sufficient funds for a transaction, your debit card may be declined.
  • To avoid being declined in-store, you could arrange an overdraft up to a certain limit, or link your checking account to a savings account for overdraft protection.
  • Using your debit card and checking account won’t impact your credit score. 
  • If it’s a Visa Debit Card, you can use it to shop in-store, online, over the phone, and in your mobile wallet. In all situations where you enter your details like for a credit card but you may have less protection.
  • If someone uses your debit card to withdraw funds from your checking account or to make unauthorized purchases, you may or may not be able to get those funds back. Be sure to let your credit union know about any suspicious activity right away.   

Credit Cards

  • You draw on funds you borrow from your credit union, with interest.
  • Your card may or may not have an annual fee.
  • The interest rate you get is likely determined by your credit score.
  • If you pay off your card in full every month, you may avoid paying interest.
  • Making timely payments on your credit card will boost your credit score.
  • Your credit card will have a limit. To maintain a good credit score, it’s best not to use all of your available funds. 
  • You can use your card in-store, online, over the phone, and in your mobile wallet (Apple Pay, Google Pay, Samsung Pay, etc.).
  • You have enhanced protection when it comes to fraudulent activity and disputed purchases with a merchant. Just be sure to report the activity in a timely manner.

How to Choose Which Card to Use

Debit and credit cards each have their advantages, so ask yourself these questions before you decide which one to select.

Do You Want to Earn Rewards?

Many credit cards feature a rewards program, while debit cards do not. Here’s how to earn rewards on your credit card:

  • Sign up for your card’s rewards program
  • Check which purchases qualify to earn points and make sure you use your credit card in all those moments. 
  • Redeem your points for top-name brand merchandise, amazing vacations, experiences, services, and more.  

Do You Want Buyer Protection?

Credit cards have comprehensive protection from fraud and other disputed activity. All you need to do is let your credit union know what happened, and they should be able to refund you for any unauthorized purchases. 

For this reason, a credit card is a great choice when shopping online and making significant purchases. 

Debit cards don’t offer the same level of protection, though there may be steps you can take if your card is used for fraudulent activity. Be sure to report suspicious transactions and see if your credit union can help you recover the funds. 

Do You Want to Build Your Credit?

A credit card is the one to use if you want to boost your credit score. Keep these points in mind to both bump your score and reduce debt:

  • Making purchases on your credit card and paying your bill on time each month will improve your score.
  • Missed payments will ding your score.
  • You can pay the minimum amount due in months where your budget is tight.
  • Paying more than the minimum amount will save you interest.
  • The amount of available credit you use is known as your credit utilization ratio. To boost your credit score, try to use under 30% of your credit limit.
  • Using your debit card won’t have a positive or negative impact on your credit score.

Do You Want Simple Budget Management?

A debit card is best for budget management because you’re using funds you already have. If you run out of money, you simply have to wait until your next paycheck. 

This forces you to prioritize what you and your family need most each month, and stick to the plan. Plus, you won’t have to pay interest on borrowed funds or keep up with monthly payments. 

But if you only have a debit card, you may sometimes find yourself in a bind when it comes to extra expenses, such as car repairs or dental work. At these times, it might be useful to have a credit card tucked away in your wallet!

Do You Want to Withdraw Cash?

A debit card is the simplest way to withdraw cash. As long as you use an ATM within your network, you’ll be able to withdraw your own money free of charge.

Withdrawing money on your credit card is known as a cash advance and you’ll have to pay interest on the funds you borrow. The annual percentage rate (APR) for cash advances may or may not be the same as for purchases. 

Difference Between Debit and Credit Cards: Get the Right Card for You

Using your debit card for day-to-day purchases may still be a good decision, but credit cards have become the simpler, safer choice in many modern situations. 

There are many credit cards on offer today so make sure you choose the one that delivers all the services you need and want. Click below to find out more!