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Credit cards' consumer protections, rewards and purchase benefits generally make them a better option than debit cards for everyday purchases and large expenses alike. However, you might prefer to use a debit card if you have trouble qualifying for a credit card or worry about overspending and paying interest on a credit card.
How Is a Debit Card Different From a Credit Card?
- You don't borrow money when you use a debit card. Credit cards provide access to a line of credit you borrow against when you make a purchase and then pay back later. Debit cards connect and take money directly from your associated bank account.
- Your bank balance determines your debit card spending. Unless you opt in for overdraft protection, you can generally only use a debit card to make purchases when you have enough money in your account. (Even if you don't opt in, however, automatic electronic payments might overdraft your account and lead to overdraft fees.) With a credit card, you can spend up to your card's credit limit regardless of how much cash you have in your bank account. However, you might accrue interest if you don't pay your credit card bill in full every month.
- You don't need a credit history to get a debit card. Although banks will review and sometimes decline applications to open an account, it's typically relatively easy to open a bank account and request a debit card. Your credit history and credit score aren't factors when opening a bank account. Most credit cards do require a credit check, however, and you might have trouble getting approved if you don't have a credit history or have a low credit score.
- You generally can't build credit with a debit card. Aside from a few debit-credit hybrid options, debit cards don't get reported to the credit bureaus, and therefore won't help or hurt your credit. Credit cards can significantly affect your credit scores, and you can use them to build and improve your credit.
Different Fraud-Related Federal Laws Apply to Debit and Credit Cards
Two federal laws, the Electronic Funds Transfer Act (EFTA) and the Fair Credit Billing Act (FCBA), guarantee protections if someone opens an account in your name or uses your account without your authorization. One applies to debit cards—the other applies to credit cards.
|Federal Protections for Unauthorized Transactions|
|Debit Cards||Credit Cards|
|The applicable federal law||Electronic Funds Transfer Act (EFTA)||Fair Credit Billing Act (FCBA)|
|If you report your card lost or stolen before someone else uses it||You aren't responsible for unauthorized transactions||You aren't responsible for any unauthorized transactions|
|If you report your card lost or stolen after someone else uses it||You could be responsible for up to $50 if you report the loss within two business days; if you wait, you may be responsible for $500, or the entire amount||You could be responsible for up to $50 from unauthorized transactions|
|Someone uses your account, but they don't have your physical card||You aren't responsible for any unauthorized transactions, but only if you report the loss within 60 days of receiving your account statement with the transaction||You aren't responsible for any unauthorized transactions|
Do Debit Cards Have Fraud Protection?
Although the federal laws provide better protections for credit cards, in practice, debit cards might be just as safe in many cases.
For example, Visa and Mastercard go beyond the required protections and provide zero liability fraud protection. That means you won't be liable for any unauthorized charges if you report your card lost or stolen after a transaction. These policies apply to most credit cards and debit cards that are part of the companies' networks.
Which Is Safer: Credit Card or Debit Card?
Even if they both offer fraud protections, credit cards are generally safer than debit cards for several reasons:
- Credit cards can keep your money safe. You won't have to pay for credit card charges or interest that are under review when you dispute a charge. With a debit card, the money has already been taken out of your account—you have to wait for it to be credited back. Federal requirements give banks several weeks to investigate and return the money. But banks and card network policies could mean you'll get a temporary credit much faster.
- Credit cards let you dispute troublesome purchases. In addition to disputing billing errors, such as fraudulent charges, you can dispute credit card charges when there's an issue with the quality of the goods or services you buy. For example, a store might ship you a damaged product or never ship you an item you order. After trying to resolve the issue directly with the merchant, you can initiate a dispute, which can lead to a chargeback. The card issuer might quickly refund your purchase—often, forcing the store to pay for the cost.
- You can get purchase-related credit card benefits. Some credit cards also offer extended warranties and return protections on items you purchase with your card. You might even receive purchase protections, which can reimburse you if something you buy is stolen or damaged within the first few months.
Should I Use Debit or Credit?
Credit cards are generally the better option for both everyday purchases and major purchases because they offer better protections and aren't tied directly to the cash in your bank account. Plus, you may be able to use a rewards credit card to earn cash back, miles or points on all your purchases. And you could receive various types of purchase protections and insurance benefits that debit cards don't offer.
However, you might choose to use your debit card for certain transactions. For example, some companies will charge you a surcharge if you pay with a credit card, so paying with a debit card can save you money.
You also might prefer to use a debit card if you're worried about overspending with a credit card and paying interest, or if you're already carrying a credit card balance you're trying to pay down. When that's the case, your new purchases might start to accrue interest immediately, and the interest could compound every day.
Check Your Credit Card Offers and Benefits
Although paying with a credit card is often the better option, you'll want to make sure you get a credit card that aligns with your spending and goals. You can start by checking your credit score, as different credit cards might require different scores. Then, use Experian CreditMatch™ to compare credit card offers from partner card issuers and see if you have any personalized card offers based on your unique credit profile.