Credit vs. Debit: The Face-Off

See when each card is the winning choice

a credit card and a bank debit card going head to head in a clash

Kyle Hilton

En español

Published May 12, 2022

Debit cards and credit cards look like similar products, and you can typically use them to do the same thing. But they have some crucial differences. Here’s a range of situations in which you might use either, along with the card that comes out on top.

Round 1: You’re carrying a credit card balance.

From a consumer perspective, the main point of a credit card is that you can borrow money to pay for something and not pay any fees or interest — if you pay off your balance before the deadline. But carry a balance past that date, and the interest rates are crazy high. (The current national average is around 16 percent.) So, if you have a credit card balance, do all you can not to let it grow; do that by using a debit card for any in-person and online purchases, so as not to dig yourself into a deeper hole. “The last thing you want to do is run your credit card balance up higher,” says Matt Schulz, chief credit analyst at LendingTree.

The winner: Debit

Round 2: You’re making a big purchase.

Paying with a credit card, whether in person or online, gives you an extra layer of consumer protection that debit cards do not. If the merchandise you purchased is defective or you never received it, and you can’t settle the problem with the merchant, you can appeal to the card issuer to intervene. Credit cards also are more likely to automatically extend warranties on purchases and protect them against loss or theft for a limited period of time.

From a cash-flow perspective, using a credit card will give you some time before you need to pay for that purchase, whereas debit cards will take the money out of your account immediately. “You could get at least 21 days before you have to pay for the purchase,” says Curtis Arnold, founder of BestPrepaidDebitCards.com.

The winner: Credit

Round 3: You’re traveling overseas.

There are two things to focus on: currency conversion fees and transaction fees. Many credit and debit cards charge a 3 percent conversion fee; for every $100 converted, you get charged $3. Likewise, many banks charge a fee for each currency-exchange transaction, be it at an ATM or at a retailer. But not all: Debit cards from Capital One 360 and Charles Schwab are among those that don’t charge a currency fee, though you may have to pay a local ATM fee. The message here: It’s less about credit card versus debit card, and more about cards that do or don’t charge these fees. “If you’re traveling, bring a main card and a backup card, and make sure neither of them charges foreign transaction fees,” says Sara Rathner, a credit card specialist at the personal finance website NerdWallet.

The winner: A draw

Round 4: You want rewards.

While some debit cards offer cash back—including Discover Cash Back Debit, Neon PointCard and Axos Debit Card—the rewards programs on credit cards tend to be far richer. “And with a credit card, you can pick the type of rewards that you want,” says Howard Dvorkin, chairman of Debt.com—whether cash, travel points or discounts at a favorite retailer. Credit cards also often offer additional perks, including airport lounge access, shopping discounts and rental car insurance.

The winner: Credit

Round 5: You need cash.

When you have to scare up cash at short notice, but you’re far from your bank or one of its ATMs, using a debit card at another bank’s machine will cost you an average of $4.59 in total fees, according to Bankrate’s latest estimate. But a cash advance on your credit card — either in person at another bank, or at an ATM, should you have a PIN — will cost you far more. Start with the cash-advance fee — typically $10 or 5 percent of the advanced amount, whichever is more. You’ll likely be charged an interest rate higher than you would be for a purchase — for example, 25 percent. And, unlike the case with purchases, interest on the advance will start accruing immediately. So, even if you pay it all back on your next bill, a $250 advance would cost you at least $17.50.

The winner: Debit

Round 6: You’re trying to raise your credit score.

Since credit card companies report your payments to the credit bureaus, making on-time credit card payments and lowering the amount of overall credit you’re using can help build your score. So, if you’re carrying a balance on a credit card, switch to paying by debit card and focus on paying that balance down. (Asking your card company to lower your rate might make the task easier.) But if you don’t have a credit card at all, open a card, use it each month for a few small purchases (or to pay for a subscription), and then pay it off each month. Your regular, on-time payments will help raise your credit score over time, says Jasmine McCall, founder of the credit repair service The 20-Minute Credit Fix. Debit card issuers, on the other hand, don't report to the credit agencies.

The winner: Credit

Round 7: You're at a gas station

Gas stations often charge a higher price per gallon to customers who pay with a credit card instead of cash — a good reason not to use a credit card. On the other hand, even though a debit card is a stand-in for cash coming out of your bank account, it’s possible that a gas station will charge you the credit card price, not the cash price, if you use your debit card. Rules vary by state. Plus, gas stations may put a “hold” on your account for an amount that’s higher than what you actually spend. The hold will expire in a few days, but if you don’t have a large cushion in the account, you could get hit with an overdraft fee by making other purchases while the hold is still in effect, Rathner says.

The winner: A draw

Round 8: You have trouble sticking to a budget.

With a debit card, unless you’ve opted into an expensive service, you can’t spend more than what’s in your account. A credit card, however, can enable you to live above your means. If you overspend on a debit card, transactions simply won’t go through — whereas you might not realize how much you’ve spent on a credit card until the statement comes weeks later. “The debit card is more like the old cash envelope system,” Arnold says. “Some people just don’t do well with credit cards.”

The winner: Debit

Beth Braverman is a contributing writer who has covered shopping and personal finance for more than a decade. Her work has appeared in Consumer Reports, CNNMoney.com, CNBC.com and dozens of other publications.