Credit cards vs debit cards

By   |   Verified by Debbie Duncan   |   Updated 5 Oct 2023

Debit cards and credit cards look the same but serve different purposes. Both have their advantages and disadvantages.

Find out the key differences plus the pros and cons of both types of cards so you can make a better decision.

Use our credit card comparison to compare offers side-by-side.

Key takeaways

  • Credit cards offer stronger consumer protections, including chargeback rights for disputed transactions and sophisticated fraud detection systems.
  • Debit cards let users spend only the money they have in their linked bank account, avoiding debt and interest repayments.
  • Many credit cards come with perks and benefits — travel insurance, airport lounge access, etc. — that debit cards typically lack (without paying fees).

Main differences

There are a few key differences between debit cards and credit cards.

You can use a debit card to buy things with money you have in your bank account. There are no interest fees though some banks may charge interest fees if your account goes into overdraft.

A credit card works like a loan. You will have a credit limit, which dictates how much credit you have access to at any given time. When you buy something using your credit card, it will automatically get added to your outstanding balance.

Most credit card issuers typically require repayment within 30 days. After 30 days, interest will be charged on any outstanding balance.

Debit cardsCredit cards
What you can spend is limited by what you have in your bank account.The money you use is borrowed from a bank or lender.
Usually have no annual fees.Monthly interest charges on any outstanding balance.
Less risk of debt and additional charges.Some credit cards offer perks or rewards.

Does it matter if it's Mastercard or Visa?

Mastercard and Visa are two major international companies that distribute credit cards and debit cards.

Many of the debit and credit cards you see in Australia have either a Mastercard or Visa logo. Both are accepted almost anywhere, so it doesn’t really matter which one you have when it comes to everyday spending. The deciding factor may be a related account feature like access to special deals or lower fees.

American Express do not issue debit cards.

Pros and cons

One payment method may fit you better than the other. Let's look at the pros and cons of both.

Debit cards

  • There are no annual fees or recurring charges.
  • You’re only spending your own money, which greatly reduces your risk of overspending.
  • Easy to get.
  • Your card issuer may offer an overdraft service that allows you to withdraw more than is available in your account.
  • Lower surcharges compared to credit cards.
  • Using a debit card can’t improve your credit score.
  • You may have to pay overdraft fees.
  • Most cards have a daily withdrawal limit.

Credit cards

  • Can help establish or improve your credit score.
  • They come in handy in an emergency.
  • They often have perks and rewards like cash back or frequent flyer points on purchases.
  • Your credit limit can increase over time if you make repayments on time consistently.
  • If you don’t pay the outstanding balance in full within 30 days, interest will begin to accrue.
  • Higher surcharges and fees compared to debit cards.
  • You can lower your credit rating by spending too much or not making timely repayments.
  • They are more difficult to get than a debit card.

Is a debit card or a credit card better?

Both credit and debit cards have their strengths and weaknesses. What is best for you depends on your specific needs.

If you are looking to make a large purchase but aren’t sure if you will have the necessary funds, a credit card may be suitable. If you don’t want to pay interest or make monthly repayments, a debit card may be a better fit.

When you use a credit card, there is the risk of not being able to repay what you owe. It’s best not to use a credit card unless you’re sure you have — or will have — enough money to repay it on time.

Debit cards are easy to use, and almost everyone has one. One of the main benefits of using a debit card is that you are much less likely to overspend or get into long-term debt since you’re using your own money.

When deciding on a debit card, it’s best to find a bank that you feel works best for you. Check if there are any annual fees or charges to keep an account open.


Can a debit card be used as a credit card and vice versa?

Some banks may offer an overdraft service that can act almost like a credit card for you, giving you access to a limited credit line without having to apply for a new card. However, an overdraft can be expensive.

Is it safe to use a debit card online?

Using a debit card online is safe when you use it with verified retailers.