Debit Cards vs. Credit Cards

Photo of debit card and credit card

Confused about the difference between debit cards and credit cards? Not sure if your debit card should be processed as credit or debit? Don’t worry – you’re not alone. We’ve put together this quick guide to explain some of these differences.

Debit Cards: Part Of Your Checking Account

Debit cards are connected with your checking account. Like a paper check, making a purchase with your debit card debits the funds right from your bank account.
If there isn’t enough money in your checking account, your transaction will decline (or your checking account will go negative). This means it’s a lot harder to spend money you don’t have.
Because the money is taken out of your bank account, you won’t have a monthly bill or pay any interest charges. Since there are no payments, debit cards don’t help build your credit history.
Your debit card is also your ATM card, meaning you can get cash from your bank account at an ATM.

Credit Cards: A Separate Credit Account

Credit cards are a line of credit that’s separate from your bank accounts.
The amount you can charge on the card is determined by your credit limit. If the amount you charged exceeds your credit limit, transactions may decline.
You’ll receive a monthly bill and have the option to pay in full or pay a minimum monthly payment each month.
You’ll be charged interest if you don’t pay the full balance each month.
Credit cards may be used to get a cash advance at an ATM, but this isn’t recommended because it often means additional fees.
Credit cards can help build your credit history. They can also harm your credit if you miss payments or carry a balance at or near your credit limit.
Many credit cards offer rewards, extended warranties, and other perks.

What About Using Your Debit Card As Credit?

Many merchants will give you the option to have your debit card processed as credit or debit. Choosing the credit option will not turn your debit card into a credit card or provide the credit card features mentioned above.
It’s up to you whether you prefer to process your debit card as a debit or credit transaction. Here are the key differences between the two transaction types: