Whether to use credit or debit cards is a constant struggle for many. Well, debit cards and credit cards might look identical, have a 16-digit card number, magnetic chip, expiration date, and help you make purchases in stores as well as online, but they function very differently. Hence, it becomes important to know the best fit for you.
The prime difference between credit and debit cards is the source of money used for the purchase. Knowing what, when, and how to use each card can help you maintain a healthy relationship with your finances, build a strong credit history and keep your debts in control.
| Debit Card | Credit Card | |
 How it works |
It deducts money for your purchase directly from the funds deposited in your bank account. | It allows you to borrow funds to pay for your goods and services within your credit limit. |
 Source of Funds |
The amount in your savings or current bank account. | The card issuer gives you access to the money you don’t have. |
 Annual Fee |
Debit cards have no annual fee. | Credit card’s annual fees vary from card to card, while some don’t charge any. |
 Debt |
There is no risk of debt as the user spends only from the funds he has in his account. | These cards usually accumulate high-interest debt as the user spends more than he can payback. |
 Payment |
No payment needs to be made within a specified time limit as you are using your own money. | You need to pay your credit card bill each month as it is borrowed money. |
 Charges & other Fees |
The bank charges debit card maintenance fees and PIN generation fees. | Credit cards have multiple fees like- Interest Charges, Late Fees, Balance Transfer Fees, etc. |
 Rewards |
They usually offer no or very minimal rewards. | They offer redeemable and huge cashback, airline miles, and rewards points. |
 Credit Score Impact |
Debit Cards affect your credit score in no possible way. | A Credit Card balance highly affects your credit score. Paying bills on time and keeping a low credit card utilization can help your FICO or VantageScore Credit Score. |
 Withdrawing Cash at ATMs |
If you have funds in your checking account, debit cards allow you to withdraw cash from your bank via ATMs for no fee or others with minimal charges. | You can withdraw cash using a credit card, but always avoid it as you will be charged high interest from the very day you pull out money. |
If you pay in full, why not earn cash back and points?
The reason why everyone finds credit cards attractive is because of the flexibility it offers to pay off the balance over time. However, using this liberty might not be the smartest move to manage your credit card debt.
It is best advised to make your credit card payment in full each month, or if you pay only the minimum amount you could take years and end up paying hundreds of dollars in interest. Depending upon the credit card you choose, you may enjoy various benefits like- purchase protection, traveling on a budget, amazing cashbacks, credit card points, and perks such as free checked bags on flights or lounge access. This way, you will never miss out on the rewards and benefits you truly deserve.
Credit Card Rewards accumulate quickly in meaningful value.
Undoubtedly, rewards credit cards are one of the best ways to rack up points and miles, and they cover the cost of most of your vacation and shopping as well. Credit card rewards can be a little confusing at times, but they can be very lucrative if used effectively. Although, you can’t expect to earn thousands of points without spending thousands of dollars with your credit card. The easiest way to do so is by taking advantage of the bonus categories/offers or hitting the minimum spending requirement to earn a signup bonus.
Most credit cards offer rewards that help you earn significant points and miles, which accumulate quickly based on your expenses- another major distinction between debit and credit cards. These cards can help you save money on everything from- online shopping to travel bookings. You can enjoy amazing cashbacks on your everyday purchases and earn incredible credit card points and miles by spending on categories like gas, dining, and groceries.
Want to boost your rewards conveniently? Download the Free Uthrive App to maximize credit card rewards in no time. Get personalized recommendations for your purchase and credit card to save big! It even offers benefits like tracking the progress of signup bonuses, the best credit card based on your location, and lots more.
