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What is the difference between credit cards and debit cards?

23 May 2023Isabelle Coetzee 4 min read
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One of the most common choices you face when managing your finances is deciding between using a debit or credit card. Both options allow for easy and secure transactions, but there are distinct differences between debit and credit cards.

“Debit” is a financial term describing when you make purchases or pay bills without using credit. It refers to the process of withdrawing your money from a bank account.

Debit cards are the most common way to transact and get issued by banks or other financial institutions. It's important to note that debit isn’t the same as credit. When you use a debit card, the amount withdrawn is deducted from your account balance, so you can only spend what you have. With credit, you're borrowing money that is repaid later with interest. However, debit cards may come with fees that you should know about and can include; overdraft, ATM, and monthly maintenance fees.

You should consider that while debit cards may seem similar to credit cards, they operate differently. It means that they may have distinct fee structures. Therefore, it's crucial to understand these fees and how they could impact your finances. That way, you can make informed decisions about applying for a debit or credit card.

Debit cards are one of the main ways people access their money for day-to-day living expenses. Managing debit card usage can help you maintain the financial stability required for long-term success.

“Credit” is an agreement between a borrower and a lender where you can access goods or services before making a payment. It’s a powerful financial tool that enables individuals and businesses to access opportunities they might not have been able to otherwise, such as home improvements, purchasing a car, or covering unexpected expenses.

One of the most common forms of credit is a credit card offered by financial institutions. It allows you to borrow money up to a set limit. Credit cards have many benefits, such as convenience and the ability to establish your credit history. However, interest charges can quickly accumulate, causing financial strain. It's crucial to read the credit card agreement thoroughly and understand all possible fees, such as annual, late payment, and initiation fees. Make sure you know what you're getting into before signing up for a credit card because if used irresponsibly, you can end up with a large debt. Therefore, it's essential to understand the definition and appropriate use of credit and credit cards to manage your finances effectively.

Debit cards

Credit cards

A debit card is linked directly to your cheque account.

A credit card isn’t attached to your cheque account but has a predetermined credit limit.

You can only spend the money in your bank account to pay for goods or services.

Allows you to borrow money from a lender to pay for goods or services.

Debit cards usually have lower fees.

Credit card fees are usually higher.

Fewer rewards or benefits when used.

Get rewards and benefits when used.

More widely accepted as a payment option.

It is less likely to be considered as a payment option.

It can offer less protection against fraud.

It can give more protection against fraud.

Different types of credit cards can offer rewards, convenience, and flexibility. With so many options available, choosing the right credit card that matches your financial needs and goals is vital.

Here are the four most common types of credit cards on the market:

1. General Purpose Credit Cards

These cards can be used for any purchase, from groceries to travel bookings. They usually come with rewards programs that offer cash back, points, or miles redeemed for different benefits.

2. Secured Credit Cards

A secured credit card could be a good option if you have a limited credit history or want to improve your credit score. This type of card requires collateral in the form of an asset the borrower owns, which can cover any unpaid debt.

3. Business Credit Cards

If you're an entrepreneur, a business credit card can help you keep your expenses separate from your finances. It often comes with features like expense tracking, customized employee spending limits, and rewards for business purchases.

4. Premium Credit Cards

These cards usually come with exclusive benefits and rewards for those who travel frequently. They might include airport lounge access, concierge service, and travel insurance, among other benefits.

When choosing a credit card, it's important to consider the benefits, rewards, fees, interest rates, and other terms and conditions. With research and selecting the right card for your situation, you can make the most of your spending while building a positive credit history.

When learning about the differences between debit and credit cards, it is good to consider the pros and cons of each.



Convenience: You can use them anywhere that accepts credit cards as payment. It is helpful if you don't have cash or don't want to carry around a lot of cash.

High-interest rates: They typically have high-interest rates. It means that if you carry a balance on your credit card from month to month, you’ll pay a lot in interest charges.

Builds credit history: Using a credit card responsibly can help you build a positive credit history. A solid credit history can also help you get lower interest rates.

Annual fees: A disadvantage of credit cards is that some have annual fees to maintain the account.

Rewards and benefits: These rewards and benefits can save you money and provide additional benefits when you use your credit card.

Late payment fees: If you make a late payment on your credit card, you will likely be charged a late payment fee. Additionally, making late payments may negatively impact your credit score.

Fraud protection: If your card is lost or stolen, you won't be responsible for any unauthorised charges to your account. You can dispute the charge with your credit card company for a refund.

Fraudulent charges: If your credit card information is stolen and used to make fraudulent charges, you may be responsible for those charges, or they may go unnoticed.



Convenience: You can use them to make purchases anywhere that debit cards are accepted online and in-person. Additionally, you can use them to withdraw cash from ATMs when needed.

Easy to lose or misplace: It may take time to cancel and get a new debit card if you lose it. They are linked directly to your bank account, which means that if your card is lost or stolen, your entire bank account could be at risk. You may also be responsible for any unauthorised charges on your card before you cancel it.

No interest charges: When using a debit card, you can only spend money you have in your account. It means you’ll never have to pay interest charges on your purchases.

Less protection against fraud: When your debit card information gets stolen, the thief can drain your bank account. Additionally, it can be hard to get your money back if you are a victim of debit card fraud. You won’t get reimbursed if you use your debit card to make a purchase when the merchant is a scammer.

Safe: When using a debit card, your money isn’t put at risk as it would be if you were to use a check or cash. Additionally, if your debit card is lost or stolen, you can report it to your bank, and they will cancel the card and issue you a new one.

Fees: Some banks charge monthly fees for having a debit card, and there may also be fees for using ATMs. Additionally, you may get charged a fee if you make an international transaction with your debit card.

Discounts: Many banks offer discounts on certain purchases when you use your debit card. For example, you may get a discount on petrol when you use your debit card at a specific station.

Limiting on spending: If you don’t have enough money in your bank account, your debit card may not allow you to make certain purchases. It can be frustrating if you need to make an emergency purchase.

Credit cards have become part of our lives, but getting approved for one isn’t always guaranteed. Credit card providers have specific criteria you must meet to qualify, such as credit history, income, and employment status. If you don't meet the requirements, don't worry. You can still consider obtaining a debit card, which operates similarly to a credit card but draws directly from your bank account instead of providing a line of credit. It’s good to weigh the benefits and risks when deciding the best option. Ultimately, making an informed choice can help you make the most of the differences between debit and credit cards.

Many people are unsure about the differences between debit and credit cards - specifically, whether or not they charge interest. Debit cards usually don't charge interest, but nearly every credit card does. And interest rates on credit cards can be as high as 25% or more! Interest can make it hard to pay off your balances, leading to long-term debt. It's good for you to read and understand the terms and conditions of your credit cards before using them to avoid unexpected interest charges.

When it comes to choosing between a credit card and a debit card, it's important to understand the main differences between the two. While both cards can be convenient for making purchases, they operate very differently. A debit card links directly to your checking account and can only be used up to the amount within that account. A credit card, on the other hand, allows you to borrow money from the bank with the promise of paying it back later. If you're someone who is disciplined with their spending and likes to avoid debt, then a debit card may be a better option for you. However, if you're looking to build your credit or enjoy the many perks that come with credit cards, then it may be worth considering one. Ultimately, your decision will depend on what works best for your financial goals and habits. A better understanding of the differences between debit and credit cards can help you decide what’s the best.

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Isabelle Coetzee Image

Written by Isabelle Coetzee

Freelance Copywriter

Isabelle is a freelance finance writer and journalist in Cape Town. She helps make managing your personal finances calm, clear and easy to understand.