With a credit card, you borrow money which you pay back later. While a debit card takes the money from your bank account straight away. So, which is best? Carry on reading...
Overlay
Debit card vs credit card
A credit card, or debit card? Which is best?
What is a credit card?
A credit card is a way for you to borrow money to pay for purchases.
You'll get a physical card sent through the post. But you can also use your card digitally. Just add to your phone's wallet – either Apple Pay or Google Pay™.
When you apply for your card, you'll be told your credit limit. This is the maximum you can borrow.
Each month, you'll get a bill for what you've spent. If you pay off all your balance (what you owe), you won't pay any interest.
What is a debit card?
A debit card is a way for you to spend money you already have.
Also known as a bank card, it's the physical card you receive when you open a current account. You can also use your card digitally, just add to your phone's wallet – either Apple Pay or Google Pay™.
Your debit card and current account are linked. So when you buy something with your debit card – or get cash out – the money comes straight out of your account.
If you don't have the money in your account, you'll go into an overdraft. This is a type of borrowing that usually charges you interest.
What you can use a credit card for
You could protect purchases – buy something on your credit card that costs more than £100 and up to £30,000, you could be covered by Section 75 protection. If you pay a deposit of over £100 using a credit card, you’ll be protected for the full value of the purchase, even if you pay the remaining balance with another means.
You could enjoy interest-free credit for a while– if you don't owe on your card then buy an item on day one of the billing cycle, you could enjoy 56 days' interest free.
Some cards come with 0% offers – with a 0% balance transfer deal, you could move debt from another lender's card and pay no interest during your offer.
Additional benefits – some offer perks or cashback when you use it for spending.
You could build your credit score – by paying in full each month and not going over your limit.
Your credit score is based on lots of factors. So there is no guarantee it could go up.
Information Message
Things to think about when using a credit card
You're in debt – a credit card is an easy way to borrow and it could be tempting to overspend.
You could pay high interest rates – if your card doesn't come with a 0% offer and you don't pay it off each month, you'll pay interest. This could lead to higher costs.
You might be charged fees – for example to transfer a balance (move debt) from another card. If you take cash out on your card, you could also be charged a fee, plus interest from day one.
Fees abroad – if you use your credit card abroad, you'll often have to pay fees. It depends on your card type, so it's a good idea to check.
If you miss a credit card payment, you might impact your credit score. This could make it harder for you to borrow in future.
Information Message
What you can use a debit card for
You could avoid debt – you're spending money you already have (unless you go into your overdraft). So, you won't be in debt or pay interest.
No fees to take cash out in the UK – you won't usually have to pay a fee to take cash out in the UK, unless the cash machine has a fee. (If you're abroad, you could still be charged.)
Get purchase protection thanks to "chargeback" – you could get protection if something you buy via debit card is damaged, not as described, or not delivered.
Information Message
Things to think about when using a debit card
If you spend more money on your debit card than you have in your account, you could get into debt. If you have an arranged overdraft, this could be a handy short-term safety net. This usually means you'll pay interest. If you haven't agreed an overdraft, you'll go into an unarranged overdraft or your transaction will be declined. Going into an unarranged overdraft could impact your credit score.
You won't benefit from Section 75 protection – If you pay a deposit of over £100 using a credit card, you’ll be protected for the full value of the purchase, even if you pay the remaining balance with another means. Alternatively when using a debit card, you get card protection from "chargeback".
Fees abroad – if you use your debit card abroad, depending on the type of account you hold, you may pay a fee.
Doesn't improve your credit score – a debit card doesn't affect your credit score. So, it won't help you build your credit history.
Information Message