Credit cards vs. debit cards: Pros, cons, and security concerns

Editorial Team

6 min read
Person paying with debit card using Clover Flex

Debit and credit cards are both convenient forms of payment that shoppers often use interchangeably. However, there are differences between these two types of payment cards.

  • Debit cards are tied directly to your checking or savings account, and the money from your transaction is deducted in real time. You can use a personal identification number (PIN) to withdraw money from ATMs, purchase products in-store or online, or use in mobile wallets.
  • Credit cards provide you with just that – a line of credit to be paid back to the card-issuing bank later. Some cards have PINs, allowing you to withdraw “borrowed” money from ATMs. However, most people use credit cards to buy products online, at brick-and-mortar stores, or use in apps. In addition, some credit cards require signatures to complete an in-person purchase. 

Due to these differences, there are certain pros and cons that come with using either of these popular payment methods.

Pros and cons of debit cards

Advantages of debit cards

Because debit cards are tied directly to your bank account, you can only use the funds that are available within the account. This helps minimize the possibility of accruing debt. Moreover, there aren’t typically many fees involved with debit card use — unless you make a purchase that overdraws your account or you withdraw money from an out-of-network ATM. You may even be able to avoid some ATM fees if you request cash back when making purchases at POS terminals

There are two additional benefits of debit cards: 

  • Because debit cards provide easier access to cash, you can still do business with those who may not accept plastic – i.e., street vendors, taxis, laundromats.
  • Debit cards are PIN-activated, which can offer more security than simply providing a signature that can be difficult to verify. 

Disadvantages of debit cards

Because the debit card is connected to your bank account, you can run the risk of losing your money if someone steals your debit card or account information to make fraudulent charges. According to the Electronic Funds Transfer Act, you have two business days to report the theft to your bank or financial institution. After that, your liability could be as much as $500.  

Another potential disadvantage of using a debit card is that you can only spend what’s currently in your bank account. Although this is a good strategy for avoiding debt, it may not be ideal if you have an emergency that requires more money than you have available.

Pros and cons of credit cards

Advantages of credit cards

One of the primary benefits of using a credit card is that it acts as a buffer between outside security threats and your bank account. Your card could be lost or stolen, but the money in your bank account stays safe. 

Additionally, many card-issuers offer zero liability protection, or $0 fraud liability, which means that even if someone racks up fraudulent charges on your credit card, you’re not personally responsible if you report it right away. Some banks may even credit the stolen funds back to your account before they start their investigations. 

Some credit cards also come with a range of benefits, including: 

  • Cash back rewards and frequent flyer miles 
  • Automatic insurance for flights and rental cars 
  • Extended warranty protection for products 

Disadvantages of credit cards

When you buy something with a credit card, you’re spending money you may not necessarily have at the moment. Because credit lines usually carry interest, you may end up spending more money paying down this debt over time. 

On average, American households carry nearly $9,000 in credit card debt. Nationwide, the credit card debt totaled $925 billion in the third quarter of 2022. It’s also not uncommon for consumers to take out a second card with a lower interest rate to help pay off the first one. 

Moreover, credit cards can carry a lot of fees — especially if you miss a payment. Nonetheless, even with a card that offers “free” perks and benefits, there may also be an annual membership fee.

Which payment card is best to use?

Because of the pros and cons of these two payment methods, there are scenarios in which debit cards may be a better option, and there are cases where credit cards are the smarter choice.

When to use a debit card

As a general rule, here are some things to consider when deciding if using a debit card is the better option: 

  • You need access to quick cash – either via ATMs or at the POS device.
  • You are debt-averse and want to control your spending. 
  • You don’t have a low-interest or no-interest credit card.

When to use a credit card

If you’re worried about fraud protection, credit cards may be the safer payment method. They’re even more secure since chip-enabled EMV credit card processing has become the norm in the U.S. and around the world. 

Though when shopping online, credit cards aren’t inherently safer than their debit counterparts. Criminals can still intercept your account number and rack up fraudulent charges. However, as mentioned above, credit cards can offer more liability protection if this ever happens, making them a more secure option for eCommerce.

In addition, most major credit cards are accepted worldwide, making them the better choice when traveling abroad. By contrast, any debit cards you use may likely be out of network, potentially causing you to rack up higher ATM fees every time you withdraw cash, and possibly not converting at the best exchange rate. 

Other scenarios to consider when using credit cards vs. debit cards include: 

  • You’re 100 percent positive you can pay off the balance every month. If there is no debt on your credit card at the end of each billing cycle, the interest rate becomes irrelevant. 
  • You’re trying to grow your credit score. Responsible use of your credit card is one of the fastest ways to improve your financial health. 

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This information is provided for informational purposes only and should not be construed as legal, financial, or tax advice. Readers should contact their attorneys, financial advisors, or tax professionals to obtain advice with respect to any particular matter.

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