Debit cards vs Credit cards

By Mozo ·

Once you’ve read up on debit cards and the different fees and features they typically come with, you might start to wonder about how they differ from credit cards and which option is best for you. 

So, to help clear any confusion, we've gone through and compared the two, from features to fees and everything in between!

What is the difference between debit and credit?

The main thing that sets a debit card apart from its credit card cousins, is that a debit card lets you make purchases via your card using your own money, whereas a credit card allows you to borrow money to make purchases via your card - essentially like an easily accessible personal loan.

That means that when you use a debit card, you’re only spending the money that's in your transaction account. So, generally speaking, you don’t pay interest, and there’s no risk of racking up a big debt.

Compare debit cards - last updated January 16, 2021

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Snapshot comparison: Debit cards vs. credit cards

Here’s a quick look at how credit and debit cards compare:

Now let's take a look at those features and a few more important points in a little more detail...

Available funds

The main reason you'd keep this piece of plastic in your wallet is the convenient access it gives you to money, right?

Debit Cards:

  • You only have access to funds that are in your bank account.
  • Some debit card issuers will also offer the option of an overdraft service - but this often turns out to be more expensive than it’s worth.
  • There’s also sometimes a withdrawal limit to consider, for example: If you have $3,000 in your account but your daily withdrawal limit is $2,000, then you won’t be able to spend the last $1,000 using your debit card.

Credit Cards:

  • You aren’t limited by the size of your bank account when using a credit card - just by the credit limit you qualify for.
  • If you’re new to using a credit card, then you might only be eligible for a credit card with a small credit limit, but this can increase as time goes on and you prove yourself as a responsible borrower.

Fees & charges

You don’t want to wind up paying a bunch of extra fees on top of what you spend at the grocery store, so it's important to know about the different fees and charges that come with using plastic.

Debit Cards:

  • Generally, debit cards don't have an annual fee, however, the bank account it’s linked to might come with a monthly service fee.
  • You also won’t pay any interest with a debit card, making it a pretty cost-efficient way to spend money.
  • Be aware that you might be charged a surcharge for using a debit card at some businesses - which can usually range from about 0.5% - 1% of the value of the transaction.

Credit cards:

  • Credit cards can pack a real punch in the fees department if you’re not careful. The main extra charges to consider include annual fees, cash advance fees and the interest rate you’ll pay on your spend.
  • Like with a debit card, you could be charged a surcharge when using a credit card at some business, only, a credit card surcharge is usually a little higher than a debit card surcharge (approximately 1-3%) depending on which card you have.


Everyone loves a freebie, so why not pick up extra perks when you hit the shops? 

Debit card:

  • Some debit cards do offer the option to earn rewards on your spend - points schemes, cashback on tap and go purchases and exclusive retail offers - but many don’t, so if you're in it for the freebies, a debit card isn’t likely to satisfy you.

Credit card:

  • There are heaps of awesome rewards credit cards that offer everything from retail rewards and free flights to complimentary travel insurance.
  • Keep in mind that you’ll usually pay more in fees and interest to have one of these cards in your wallet - but if you find a good one then the perks can more than makeup for that.

Chance of debt

Although plastic is convenient, that’s hardly worth saddling yourself with a bunch of debt next time you hit the shops.

Debit card:

  • One of the only ways you could potentially wind up in debt by using a debit card is if you’ve used the overdraft service - in which case you might wind up paying some hefty fees and interest.
  • But if you use your card responsibly or opt-out of the overdraft service, you can’t really go into debt using your debit card, because you can’t spend money that isn’t yours.

Credit card:

  • It’s no secret that credit cards (when used irresponsibly) can lead to a bill as long as your arm or potential debt. That’s because people too often forget that a credit card is basically a loan that needs to be repaid each month.
  • Worried about winding up with credit card debt? Read our guide on how to manage your credit card balance effectively.

Credit history

If you ever want to take out a home loan to buy a house or borrow any other money in the future then you’ll need to have a good credit history to get approved. Your current spending habits can help you build that history.

Debit card:

  • Using a debit card doesn’t affect your credit history, because you aren’t accessing credit - just your own money.
  • While this can be good as it limits your chances of damaging your credit rating, it also means that you aren’t making any progress toward establishing a good credit history either.

Credit card:

  • Your credit card use will affect your credit history.
  • Responsible spending will help build your reputation as a good borrower and stand you in good stead for getting approved for larger amounts of money later.
  • The flip side, however, is that if you lose control of your credit card balance, it will reflect badly on your credit rating, and might even prevent you from securing a loan later on.


Another good thing about having a credit or debit card is that it tends to be much safer than carrying a bunch of cash around in your pocket! Having said that, it comes with a few safety concerns of its own.

Debit card:

  • Although having a PIN makes debit cards fairly secure, you do still need to take extra precautions as it’s a direct link to your money. If you lose your debit card, anyone can pick it up and use it.
  • This means that if you become the victim of fraud, there’s not much to stop someone from cleaning out your account, although if you alert your bank right away, most will reimburse you.

Credit card:

  • There’s just as much chance that you’ll become a victim of fraud or theft with a credit card as with a debit card.
  • The main difference is that a credit card isn't directly linked to your money, so if you report the fraud before making any payments, chances are you won’t end up liable to foot the bill.

Application process

Having a piece of plastic in your wallet is all about convenience - so just how hard is it to get your hands on that plastic?

Debit card:

  • When you sign up for a bank account, many providers will offer you a debit card to go along with it.
  • There usually aren’t any stringent eligibility requirements when it comes to applying for a debit card, because you’re not borrowing any money, you're just accessing your own money.

Credit card:

  • Credit cards, on the other hand, can be a little harder to acquire than debit cards.
  • In order to apply for a credit card, you’ll need to fill out an application and provide details about your finances, employment and income.
  • Some credit cards will have a minimum income requirement. This is because your credit card gives you access to the bank’s money - so they want to know you that you're a responsible borrower who can afford to pay it back.
  • Check out our guide to applying for a credit card.

So, debit cards or credit cards: Which is better?

Neither is better nor worse - which option is better for you, however, will depend on your specific financial circumstances.

  • Debit cards are great for risk-free access to money you already have tucked away in your account.
  • Credit cards, on the other hand, can be great for earning rewards, making big-ticket purchases and making them back later or as a last resort, for making ends meet between paycheques (but remember, that shouldn’t be a long term solution!)

Which one is best for you will depend on your spending habits and what you want to get out of your piece of plastic. You may even decide to have one of both to use for different situations.

Find a debit card

If you decide to go with a debit card, then the next thing you’ll want to do is head to our debit card comparison table, where you can compare debit cards side-by-side to find yourself a great deal.

For more info, have a read of our guide on debit card fees and features.

Find a credit card

Decided to go with a credit card instead? Compare your options by heading to our credit card comparison table. Or, for more information to help you better understand credit cards, check out our credit card guides.

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