What Is the Difference Between Credit and Debit Cards?
Credit and debit cards can both be used for shopping but operate differently. Credit cards impact your credit score but debit cards don’t—read on for more.…Continue readingWhat Is the Difference Between Credit and Debit Cards?

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

While both debit and credit cards allow users to spend money, they operate differently. Your debit card directly withdraws money from your checking account at the time of payment. When you use a credit card, you’re buying things with the promise that you’ll pay back what you spend at a later date, as well as potential interest. Since you’re essentially borrowing money, credit highly impacts your credit score, while debit doesn’t.

Credit cards v. debit cards

What Is a Credit Card?

A credit card allows you to buy things without paying out of pocket at the time of purchase. They’re accepted at most retailers, especially if issued by well-known lenders. Keep in mind that some places don’t take all credit cards. For example, many places in Europe don’t take American Express cards because the brand is less popular there and the convenience fees are high.

What you spend is covered by your credit card company until your card’s due date. A few important dates to remember are:

  • Due date: This is when you must pay at least the minimum payment noted on your billing statement.
  • Billing cycle date: This is when a new statement begins and the previous one ends.

Once made available, your billing statement will show all transaction history for the specific billing period, as well as your card balance. You can access this statement either online or by mail. 

Credit card companies can implement different types of fees to ensure that they’re paid back, as well as annual fees for benefits of using their card. The longer it takes you to pay off your balance, the higher interest and annual percentage rate (APR) you accrue. This is the percentage of interest you pay on your bill. For example, let’s say your APR is 10 percent and your outstanding balance is $600. At the end of your billing cycle, your outstanding balance would increase to $660. Interest will continue to accumulate until you pay off your card.

Credit cards have ample fraud protections built in. Your credit card may automatically freeze when your card issuer is alerted of suspicious activity until you can verify and clear the purchases. If your information is stolen and unfamiliar transactions appear on your statement, you need to contact the company immediately.

Likewise, credit cards also protect users from scams and problematic transactions. You can submit a claim for a chargeback, which is a request for returned payment. Then, your credit card company will work to investigate and reimburse you for the transaction if it is indeed found to be fraudulent.

How to Get a Credit Card

In order to get a credit card, you must apply. Not all credit cards are the same, so it’s important to research to find a card well suited for you. Applications typically ask for your personal information, streams of income and credit score to help lenders get an idea of what kind of a borrower you’ll be.

Depending on your credit, you will either be approved or declined. Lenders want to ensure you’ll be able to pay them back, and anything that causes them to think otherwise will make it harder to get approved. In most cases, having a bad credit score will make it harder to get approved. Other factors that make it difficult to be approved include:

  • Past payment delinquencies or bankruptcies
  • High loan outstanding balances
  • High credit card outstanding balances
  • Lack of an established credit history

If declined, you can still apply for other credit cards. A good rule of thumb is to wait about six months until you apply for another credit card. During this time, work on improving the factors that caused you to get declined in the first place. Just be careful—applying for too many cards within a short period of time can actually hurt your credit due to too many hard inquiries.

Once you’re approved for a card, your credit history and score will affect your credit limit. A credit limit is the maximum amount of money you can spend on your card. Once you max out your credit limit, the only way to spend more is by paying off your balance. Paying off your balance frees up space with your credit limit.

3 considerations for credit card applications

Credit Card Pros and Cons

Your credit card will come with a variety of features to make both your life and transaction process easier. However, credit cards also have guidelines in place to ensure they aren’t abused.

Some benefits of a credit card include:

  • You don’t have to pay up front. This can help you make larger purchases that you can pay off over time.
  • Increased fraud protection. As a result, your spending may be more protected than if you were to use cash or a debit card.
  • Rewards and points when you spend money. These points can be redeemed for purchases, travel perks, discounts or cash back.
  • Building good credit. If you pay your credit card on time every month, you can build good credit history.

Some drawbacks of credit cards include:

  • Associated fees. When you’re managing credit cards, it can be easy to spend a lot of money, only to find out you can’t pay back the balance plus interest.
  • Potential damage to your credit score. If you don’t stay on top of your payments, you can damage your credit score.
  • Annual membership charge for benefits you may not use. This can also contribute to the costly effects of a credit card.

What Is a Debit Card?

A debit card is a form of payment that is connected to your bank account. These transactions are made in real time, meaning money leaves your checking account at the point of purchase. Nearly every retailer in person and online takes them, and you can also use your debit card at an ATM to withdraw cash. Note that if you’re using an ATM not associated with your bank, you may run into some fees when withdrawing funds.

Debit cards are unique in that they can be processed as credit cards. At time of purchase, you will be presented with an option of selecting “debit” or “credit.” Selecting credit doesn’t require your PIN, which can help increase security if you’re worried about someone stealing information. Note that even if you select credit, there’s no impact on your credit score and money is still taken directly out of your checking account.

Debit cards are less heavy on fees than credit cards are. Generally speaking, fees depend on your bank’s specific guidelines and regulations. You may run into:

  • A monthly fee if you don’t use your card a certain amount of times
  • A monthly fee if you don’t have a minimum amount in your checking account
  • An occasional fee if your bank account has an overdraft protection set for you (when transactions go through without a sufficient amount available in your account)

A good way to stay away from fees is by using your debit card regularly and making sure you always have a sufficient balance.

Banks also work hard to protect you from debit card fraud. Notify your bank as soon as possible if you lose your debit card or it gets stolen so they can cancel the card. If you wait to report fraudulent activity, your bank may not be able to refund you all the money lost. You must make a claim with your bank for them to investigate and refund your money. The process can take longer than that of a credit card, but you’re still protected.

How to report debit card fraud

How to Get a Debit Card

In order to get a debit card, you need to go directly through your bank and you need to have a checking account.

To set up a checking account, the bank will ask for personal information and a minimum balance in the account to get started. The minimum amount needed for a card varies from bank to bank. Once your checking account is set, you should receive your debit card in the mail. From there, all there is left to do is activate it so that your card is ready for use.

Debit Card Pros and Cons

The main benefit of debit cards is that they leave users feeling more relaxed because their account activity doesn’t affect their credit score. While debit cards don’t provide as many perks as credit cards do, they can still be very appealing to users.

Debit cards are practical because they:

  • Don’t come with heavy interest rates and don’t affect credit
  • Don’t have a date to keep in mind for paying off purchases
  • Don’t charge annual membership fees for benefits users may not even use
  • Give the ability to withdraw cash from an ATM if needed

On the downside, debit cards:

  • Require money up front and in your account to make a purchase
  • Make it possible for users to fall victim to fees if they use their card without funds
  • Apply fees if users aren’t using their card very much or fall under a minimum balance
  • Don’t provide as reliable of fraud protection as credit cards do (Note: you need to stay on top of your account activity to notify your bank of fraud as soon as it happens. Otherwise, you may not be successful in getting your money back.)

How Do Credit and Debit Affect My Credit Score?

Credit cards affect your score in many ways. Everything you do with your credit card directly impacts your credit, both positive and negative. Here are some of the most common negative factors:

  • Not being on top of making payments will hurt your credit immensely. Your payment history affects 35 percent of your score, making it one of the most important factors.
  • Late or missed payments on your credit cards. This shows lenders that you may not be able to pay them back for a potential loan.
  • High credit utilization can also affect your score. A good habit to get into is keeping your credit usage at no more than 30 percent of your spending limit.

As for debit cards, not much will affect your credit score. The money you spend already belongs to you, so there is no need to pay anything back at a later date. Transactions made from your checking account aren’t reported to credit bureaus, so they don’t affect your score.

On occasion, debit card activity does affect your credit score, like if you don’t pay back an overdraft fee for a long period of time. The unpaid debt on your debit card would then be reported to the credit reporting agencies after some time has passed.

If you want to keep your credit score in tip-top shape, aim for having a debit card and a solid mix of credit cards. This is because the FICO® scoring system factors in your credit mix  as 10 percent of your overall score. The length of your credit history is also factored into your score. If you mistreat your credit cards or run into any issues, your score can be negatively impacted. To get back on track, you may need to make credit repair a priority. Credit repair can help you rebuild your credit score, as well as deal with and fix errors. Lexington Law simplifies this process and can help you achieve your credit goals.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.


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