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Debit vs. Credit Cards: Pros and Cons of Each

Using a credit vs. debit card requires you to know yourself and your spending habits. What’s the difference between debit and credit cards? Learn the pros and cons of each below.

According to findings from the Federal Reserve Bank of San Francisco’s Diary of Consumer Payment Choice, consumers used debit cards for 30% of payments and credit cards for 24% of payments in 2019. For 26% of transactions, consumers used cash. 


Compared to cash, credit and debit cards offer better expense monitoring and make online purchases easier. However, each has distinct advantages and disadvantages. In this article, we list the pros and cons of debit cards and the pros and cons of credit cards so you can use each wisely. 


What’s the difference between debit and credit cards?

Debit and credit cards allow you to make purchases and cash withdrawals. While both may charge a fee for cash withdrawals, this is less common for debit cards; fees typically are only assessed when you use an ATM that's out of your bank's network. The main difference between debit and credit cards comes down to how each payment method works. 


When you make a purchase with your debit card, the purchase amount is immediately withdrawn from your checking account. Credit cards work a little differently; they don’t immediately withdraw funds from your checking account. 


When you use a credit card to make a purchase, you borrow money from your credit card company. When it comes to paying off your monthly credit card balance, you have the option to pay your balance in full, pay the minimum amount, or pay anything between the minimum and full amount. But, you’ll accrue interest if you carry a balance month to month. If you pay your balance on time and in full, you avoid interest and late fees. 


Next we’ll dig into the pros and cons of debit and credit cards so you can use each to your advantage.


Related Reading: How Do Credit Cards Work?


Pros and cons of debit cards

The pros and cons of debit cards can help you better understand what situations they’re beneficial for and when a credit card might be a better option. In most cases, a debit card is a good choice when you want a convenient way to get cash out of your checking account or pay for purchases in full. Since these purchases withdraw funds from your account immediately, debit cards may be a good way to ensure you don’t spend more than you have. However, debit card transactions may cause overdraft fees and have limited fraud protection. Read more about the pros and cons of debit cards below.


debit card pros and cons 


Pros of debit cards

Here are some pros of debit cards:


  • They’re highly convenient. They’re faster than writing a check and are widely accepted by retailers. Debit cards are especially convenient if you need to withdraw cash from an ATM or want to get cash back when you make a purchase at a store.
  • They typically don’t have any annual fees. Even if you use your debit card minimally, you won’t pay to keep it activated. Your checking account, however, may carry monthly fees.
  • They can help with budgeting by discouraging excess spending. Because money is immediately withdrawn from your checking account when you make purchases, you have to keep track of your spending. A debit card may help prevent you from making large, impulse purchases that you can’t afford.
  • They don’t charge interest. Since debit card payments take money out of your account right away, you don’t accumulate a balance that you have to pay interest on. This is a key difference between a credit card and debit card.


Cons of debit cards

Here are some cons of debit cards:


  • They have limited fraud protection. According to the Federal Trade Commission, if your debit card is stolen and you notify your bank within two days, you could be responsible for up to $50 of any fraudulent charges. If you notify your bank after two business days, you might be responsible for up to $500 of the fraudulent charges. Notifying your bank after 60 days means you could be liable for all of the fraudulent charges. At Cadence Bank, our clients have access to SecurLOCK Equip, an app that makes it easier to protect your debit card and spot fraudulent activity, if it occurs. Because debit cards typically have less fraud protection than credit cards, it’s best not to use your debit card for online purchases. 
  • Your spending limit depends on your checking account balance. A debit card is a good option for smaller purchases, but it’s not the best option for large expenses that exceed your account balance or that that you’d rather pay off over time. While it’s ideal to budget for large expenses, a credit card is another way to help you afford them.
  • They may cause overdraft fees. With a debit card, it’s possible to overdraw funds from your account if you don’t keep close tabs on your checking account balance. Overdraft consent enables these transactions to occur by charging a fee. You can opt out of overdraft consent, but this means your debit card will be declined for purchases you can’t afford.
  • They don’t build your credit score. Since debit cards are directly linked to your checking account, they don’t affect your credit score. If you’re looking to build your credit history, debit cards won’t help. 


Pros and cons of credit cards 

Credit cards offer many advantages, including cashback rewards and strong fraud protection. They can also be used to finance large purchases, but carrying a large balance can lead to interest accumulation and hefty payments you might not be able to afford. Using a credit card calculator can help you understand just how long it might take to pay off a purchase depending on your budget and your card’s interest rate. Learn more about the pros and cons of credit cards below.


credit card pros and cons 


Pros of credit cards

Here are some pros of credit cards:


  • They offer short-term financing. Since you don’t immediately pay for your credit card purchases, credit cards offer short-term financing. This is beneficial in emergency situations or when you want to pay down a larger purchase over time. However, be weary of the interest you’ll pay when you don’t pay your balance in full each month. Learn about other financing options, like a personal loan vs. personal line credit. 
  • They can build your credit history. Making credit card payments on time helps you establish a credit history and improves your credit score. Your credit score is an important factor in taking out a car loan or mortgage; a good credit score can also help you secure a better interest rate for these purchases. This is a big difference between debit and credit cards as debit cards don’t affect your credit score.
  • They may offer cashback or rewards programs. This is one of the biggest perks of credit cards. Some credit cards offer more cashback rewards for certain purchases, such as those related to airfare, gas or entertainment. 
  • They offer better fraud protection. The Federal Trade Commission explains that, thanks to the Fair Credit Billing Act, your liability for any fraudulent charges made on your credit card is capped at $50. Since credit card purchases don’t immediately withdraw funds from your checking account, this may add another layer of fraud protection. 


Cons of credit cards

Here are some cons of credit cards:


  • There’s a danger of spending more than you can afford. A credit card has a set limit, but it might be more than what your budget allows. Because you have the option of carrying a balance on your credit card each month, it might be easy for your spending to get out of control. If this goes on for too long, your credit card debt might become overwhelming.
  • You pay interest when you carry a balance. If you don’t pay your credit card balance in full each month, you’ll pay interest on your unpaid balance. As the amount of interest you owe increases, it can become more difficult to pay off your principal balance.
  • Late payment fees can stack up. If you miss a credit card payment, the fee can be costly. Making a habit of this can be damaging to your finances and credit rating. 
  • They can hurt your credit score. Just as credit cards can help build your credit rating, they can also damage your credit—if used poorly. It’s important to make payments on time and ensure you can make the minimum required monthly payment. If not, your credit score could go down. 


Related Reading: 7 Common Credit Card Myths and Facts


Debit vs. credit cards: when to use each

Based on these pros and cons of credit and debit cards, each option is best for certain circumstances. 



Debit cards

Credit cards


  • Convenient and widely accepted
  • No annual fees
  • Can help with budgeting
  • Interest-free
  • Short-term financing option
  • Can build your credit history
  • May offer cashback rewards
  • Strong fraud protection


  • Limited fraud protection
  • Spending limit depends on checking account balance
  • Possible overdraft fees
  • Don’t build your credit
  • Danger of overspending
  • Interest payments
  • Late payment fees
  • Can hurt your credit score



Debit cards are ideal for everyday purchases, like a lunch at the office or buying groceries on your way home from work. With these smaller purchases, you can easily track your spending and ensure that you have enough money in your checking account to cover the transactions. Since you can’t spend more than you have, debit cards can also be a helpful way to build strong spending habits. 


If knowing you can carry a balance on a credit card will make you more likely to overspend, a debit card is probably the best option for you. However, it’s not wise to use debit cards for online purchases—since they have limited fraud protection. Consider using a credit card to make online purchases, but be sure to track these expenses within your monthly budget. 


Debit cards are also a convenient way to withdraw cash from your account or get cash back during a transaction when ATMs aren’t available. 


A big difference between debit and credit cards is that debit cards don’t affect your credit score. When used properly, credit cards can be a helpful way to help you build credit. If you trust yourself to spend wisely and consistently make on-time payments, they’re a great option. They also offer strong fraud protection, which is especially useful when making online purchases. 


Poor credit card use, on the other hand, is bad news. While you can use credit cards to finance large expenses that you want to pay off over time, it’s essential not to make a habit of carrying a credit card balance. It’s best to pay your credit card balance in full and on time every month so you avoid paying extra interest and fees.


Read more about personal finance


While there are many differences between debit and credit cards, each has advantages. Check out Cadence Bank’s personal debit cards, available at no extra charge with your personal checking account, and personal credit cards. If you want to learn more about personal finance, take a look at our Fresh Insights articles. From savings to mortgages, these articles cover a variety of topics to help you make well-informed financial decisions.



This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.

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