Credit vs. Debit Cards: What are the Main Differences?

Credit vs. Debit Cards: What are the Main Differences?
Point Editorial

Like a wrench and a hammer for house repairs or pots and pans and a rolling pin in the kitchen, the financial world has various tools to help people reach their financial goals. Two such tools are credit cards and debit cards.

Both cards are simple, convenient implements for handling your money and making purchases. Most people have at least one debit and credit card in their wallets, as both are acceptable payment methods at most businesses. 

Not only are they practically the same in appearance, but credit and debit cards share multiple features, including a 16-digit card number, expiration dates, a CVV on the back for security, and a magnetic stripe that is scanned whenever you buy an item. Both cards also require a personal identification number – or PIN – and must be signed by the cardholder before a card is valid for use. 

To easily identify one type of card from the other, the word “debit” is usually included somewhere on the front surface of the debit card. If the card has no label on it, it is most likely a credit card.  

That said, there are differences between the two cards that go beyond what’s visible. When you use a debit card, you draw directly upon the money you have in your bank account. With a credit card, you essentially borrow the money until the time comes for you to pay it back. As a result, credit cards have a limit of how much money you can “borrow,” while debit does not.

Again, this difference only scratches the surface. Read on to learn more about the differences between credit and debit cards and how to know which is right for you. 

What is a credit card?

A credit card works as an instrument that cardholders use to borrow money from institutions, specifically the banking institution that issued the card in the first place. Examples include Visa, Mastercard, and American Express. 

There are six different types of credit cards people can own. They are as follows: 

Standard: This is the most common card type and allows individuals to make purchases up to a predetermined credit limit.

Premium: Premium cards offer users additional benefits such as airport lounges and exclusive event access, but they come with a high annual usage fee. 

Rewards: With a rewards card, users get cash-back and travel points whenever they spend money. 

Balance Transfer: This type of card comes with low initial fees upon being issued. 

Secured: Cardholders are required to pay an upfront cash deposit as collateral before using this type of card. 

Charge cards: These credit cards come with no spending limit, but cardholders must pay the entire balance and subsequent fees monthly and entirely before entering the next pay period. 


Several advantages come with owning a credit card. First and foremost, having a credit card will help build your credit history and, by extension, your credit score. This score is hugely influential when it comes to significant life purchases like applying for a mortgage, signing a lease on an apartment, and buying a new vehicle. 

Credit cards also give you additional warranties when buying goods from certain businesses and provide better protection against fraud if your card is stolen or misplaced. 


As for credit card disadvantages, since you’re “borrowing” money from the card issuer, it can be easy to overspend. Credit cards play a significant role in calculating your credit score, and if they’re misused, this can severely damage your credit score

Furthermore, credit cards often come with a fee for continual usage and depending on the card type may also include international transaction fees.

What is a debit card?

A debit card is another tool used to handle money, but unlike a credit card, a debit card lets users draw directly from their personal bank account. Examples include Visa and Mastercard debit cards. 

There are four types of debit cards. 

Standard: Also called a check card, this type of debit card functions precisely as described above. 

Electronic benefits transfer card: State agencies usually issue this type of debit card to people who are eligible for government aid, such as food stamps and other nutritional assistance programs. 

Prepaid cards: Though essentially identical to a standard debit card, prepaid cards are not associated with a bank account. The money associated with the card is a separate, stand-alone amount, sort of like a gift card. 

ATM cards: This specific card type can only be used by entering your PIN or personal identification number at an ATM. This type of card seriously reduces fraud, as only the person with access to the PIN associated with the card can withdraw cash.


The first advantage of having a debit card is that there are no costs associated with using it. Debit cards have no annual usage fees and are usually free to use at any in-network ATM.  

Another significant benefit is that debit cards create accountability and, in turn, theoretically reduce someone’s opportunity to go into debt. The temptation to spend outside your means is significantly less because you are not spending someone’s money. When you use a debit card, your money is gone the moment you purchase something. 

Debit cards do offer some precautions against fraud, but it usually depends on who issues the card. Visa and Mastercard provide such measures. 


Arguably the most considerable disadvantage regarding debit cards is that you cannot build your credit history. For example, applying and being approved for a mortgage will be trickier if you have no established financial history that is, a record of responsible credit card usage  for lenders to assess.

Also, if a debit card is stolen or lost, the card owner is often fully responsible for any card activity or purchases, regardless of who made them.

But that’s not the case with the Point Card.

Point is a new type of debit card that combines the best parts of credit and debit: high rewards, fraud protection, and no risk. 

Credit card or debit card: Which one is best for you?

It all depends on your financial preferences. 

A credit card is a useful tool when it comes to travel. Besides offering various coverage packages abroad, foreign retailers and companies widely recognize credit cards. Typically, when you’re looking to book a hotel or air travel, a credit card is required because a “hold” is placed on your card until you pay for the services, but you can continue to “borrow” the money associated with your card’s credit limit during that time. If you use a debit card, that amount of money is frozen until you pay it, therefore reducing any potential budget you have set aside for your trip. 

Debit cards, however, give you the independence of a cardholder while letting you spend your own money and not having to worry about borrowing someone else’s. In comparison, credit cards are a tool that will help build your credit score. 

If you’re ready to reimagine your financial journey and don’t want the hassles that come with using a traditional credit or debit card, consider a third alternative: the Point Card

When you become part of Point, you receive a card that’s easy to use that also comes with exclusive perks like unlimited cash-back on subscriptions, delivery and rideshare purchases, car and phone insurance, and travel benefits, too.

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Point Editorial
A group of writers, thinkers, & designers from varying backgrounds — all part of the PointCard team. Sharing perspectives on concepts in design, finance, and culture through an everyday lens.
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