In this article, we’re answering “What is the difference between a credit card and a debit card?”
Not surprisingly, there are many differences that need to be discussed, including consumer protections, funds used to complete a transaction, and much more.
We will cover all of these differences and answer several common questions we receive from our members on this topic below.
This article is part of our free series on US credit card essentials, including how to get a credit card with an ITIN number, which you can learn more about at the link right now.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- What Is the Difference Between a Credit Card and a Debit Card?
- What Are the Disadvantages of a Debit Card Over a Credit Card?
- What Are the Advantages of a Credit Card Over a Debit Card?
- Frequently Asked Questions
- Ready to Open Accounts With Banks in the USA?
What Is the Difference Between a Credit Card and a Debit Card?
The main difference between a credit card and a debit card is that credit cards use an approved amount of credit to complete a transaction while debit cards use the current balance in the cardholder’s bank account to complete a transaction. In other words, credit increases the amount you owe to a financial institution while debit reduces the amount that you have on deposit with a financial institution.
Before diving in any further, if this is your first time visiting GlobalBanks, don’t forget to download your FREE US Banking Starter Guide. It’s designed to help non-residents with opening bank accounts at top financial institutions in the US.
What Are the Disadvantages of a Debit Card Over a Credit Card?
The disadvantages of a debit card over a credit card include a lack of consumer protection, and an inability to build a credit history, and they usually do not offer any loyalty programs or the ability to earn member rewards. In fact, if you want to get started with building a credit history, specifically credit building with credit cards in the US, you can access our free guide linked here.
Additionally, debit cards are often tied to an account holder’s primary account, which exposes the balance of the account to fraud and theft. With this in mind, the main disadvantage of using debit over credit is that it is less secure and open to risks.
Disadvantages of a Debit Card Over a Credit Card
- Lack of consumer protection
- Inability to build a credit history
- No loyalty or reward programs
- Risk of theft and loss of funds
What Are the Advantages of a Credit Card Over a Debit Card?
The advantages of credit over debit include consumer protection, building credit history, earning loyalty points, and receiving member rewards. That said, credit cards do result in debt accumulating if they are not used responsibly and paid down regularly. This is why it’s important to pay your credit card statement balance and understand the current outstanding meaning in credit card debt.
Additionally, credit cards may come with additional fees, which can be very high depending on the card issuer and the benefits being offered.
Advantages of a Credit Card Over a Debit Card
- Strong consumer protections
- Helps build a credit history
- Many offer loyalty programs
- Ability to earn attractive rewards
- Greater security and fewer risks
Frequently Asked Questions
Below are four of the most common questions we receive from people looking into the difference between using credit and debit. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
Are Debit Cards the Same as Credit Cards?
No, debit cards are not the same as credit cards. Despite looking similar, debit is tied to an individual’s bank account while credit is tied to a credit limit. In other words, when using debit, the account holder is drawing down on their own account balance while using credit increases the debt that the account holder owes to the financial institution.
Is a Credit Card Safer Than a Debit Card?
Yes, in most cases credit is safer than debit. This is because credit card issuers offer consumer protections that can ensure a customer is protected from fraud. Additionally, debit is often tied to checking and savings accounts where customer funds are held, which makes the total balance of the account susceptible to loss.
Is an ATM Card a Credit Card?
No, an ATM card is not a credit card. An ATM card generally refers to a debit card. Debit is tied to a bank account held by an individual or business. For a transaction to be processed, they need to have sufficient funds in the account. That said, a credit card does not require funds to be in the account as the payment will use credit. However, the account holder must apply for a credit card separately from their bank account.
What are 3 Differences Between Debit Bank Cards and Credit Cards?
The three main differences between debit bank cards and credit cards include that a debit card requires you to have a balance in the account to make a purchase. Also, there is no future bill for using debit. Lastly, debit is available to everyone while credit requires an individual to demonstrate their creditworthiness before being approved.
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