Do you know the difference between Debit Card and Credit Card?

We use debit cards and credit cards to buy things instead of cash. Both are convenient and accepted almost everywhere and they both offer fraud protection and security. Do you know the advantage and disadvantages of each?

Well let’s just say, you stopped by your favorite coffee shop to get a cup of coffee.  The cashier asked “would you like to pay with Debit or Credit card?” if you don’t know any different, you would hand them whatever you have in your wallet, right?

Here is the thing, you need to understand the differences between the cards and the benefits for you.

Debit card

Debit card is a payment method that is linked to your bank account. So whatever money you have in your own personal checking/saving account will be taken out when you purchase something.


  1. Once you use a debit card for a transaction, you are done. Just like you pay with your own cash. Plus it is easy to keep track of what you spend. You can check your transaction online or any ATM (automated teller machine).
  2. As far as debit card security, no one can access your bank info or cash through ATM without a PIN (personal identification number. Even if someone tries to use your debit card at a cash registry without the pin, fraud protection will protect from someone stealing your money.
  3. The debit card is interest-free. Which means whatever money you have in your account, that’s how much you can use.

Tips for using a debit card:

  •  if you have to use ATM, use your bank’s ATM to avoid any extra fee
  •  At many stores, you can ask cashback if you don’t want to use an ATM
  • Very few banks offer cashback on an ATM Purchase. Check with your local banks first


  1. Debit card can be declined if you don’t have sufficient money in your account to cover your purchase. However, some banks do offer an overdraft with an attached fee (overdraft fee, make sure to check with your bank).

Credit Card

Credit card is also a payment method. However, it is not your money.  It is money you borrowed from a bank or a credit card issuer which you have to pay back with interest if you don’t pay back within the billing cycle.


  1. Credit Card is great for emergency situations. If you are short on cash to pay for something, you can use it and pay it back.
  2. Helps you build your credit score. When you pay your bill on time, stay within your credit limit, pay more than minimum your credit score gets better each time.
  3. Extra Perks. Almost every single credit card comes with a deal. You can get cashback for your purchase, reward points (to get flight tickets and hotel rooms), travel insurance, purchase protection.
  4. Fraud Protection. If someone steals your credit card, the credit card company will protect you from any type of fraud (make sure to ask about their policy when you apply for a credit card).


  1. Late payment. If you forget to pay on time, they will charge you a late fee. Your APR (annual percentage rate) amount might rise and your credit score will drop.
  2. Credit limit fee. If you go over your credit limit, you might get charged additional fees.
  3. High spending limit. Some cards will give you a high spending limit. If you are not responsible with your spending, you may end up in an uncontrollable debt and it will be hard to get out.

Tips for using credit cards

  • If you have good credit, you can get loans, mortgage or credit cards with much less interest rate)
  • When you want to return a purchase that may not like, your credit card company can fight to get you’re the money back

Understand the pros and cons that come with each card. Next time when you are at your favorite coffee shop to get your coffee, think which one will benefit you the most.

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