What is the difference between debit and credit cards?

Debit cards are linked to a bank account, but credit cards are linked to a line of credit. That means you can spend more than you own with a credit card, but you must pay it back later, and you may be charged interest or late fees.

Which is better for your credit: debit cards or credit cards?

It depends. Credit cards are better for your credit if you pay your bills consistently and on time. If you don't, your credit score will likely go down. Debit cards can't build credit at all, but they also can't hurt your credit.

Do debit cards earn rewards?

Yes, some debit cards earn some type of purchase rewards. You can also get sign-up bonuses for some new bank accounts. However, credit cards typically have higher rewards rates for purchases, as well as much better sign-up bonuses.

Credit Card vs. Debit Card: How to Decide

Credit cards are an excellent way to pay. They're more flexible than debit cards, and in some ways, they're more secure. But what about debit cards? How do they stack up? Debit cards have their uses. For one thing, they encourage good spending habits. For another, they're cash-friendly.

Honestly, it's probably smart to have one of each. That way, you can spend money flexibly and build a credit score, but you can also withdraw cash from a linked checking account when you need it. You can also put big purchases on debit so you don't pay interest fees.

Below, we'll dive a little deeper into the credit card vs. debit card debate. That way, you know for sure you're swiping the best card for the job (and paying less money).

Credit card vs. debit card features

Here's a comparison of credit cards vs. debit cards:

Credit cards	Debit cards
Connected to a line of credit	Connected directly to your checking account
You can make purchases even if you don't have the money	You can make purchases only if the money is in your bank account
Can charge interest payments	Can't charge interest payments
Impacts your credit history	Has nothing to do with your credit history
Fraud liability is limited by law	Fraud liability could be extensive
Often include purchase protections	Rarely include purchase protections
Withdrawing cash usually costs high fees	Withdrawing cash usually costs low or no fees
Frequently charge annual fees	Almost never charge annual fees

Compare savings rates

Make sure you're getting the best account for you by comparing savings rates and promotions. Here are some of our favorite high-yield savings accounts to consider.

Account	APY	Promotion	Next Steps
Open Account for SoFi Checking and Savings On SoFi's Secure Website. Member FDIC. Rating image, 4.50 out of 5 stars. 4.50/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.	up to 3.80%² Rate info Min. to earn: $0	New customers can earn up to a $300 bonus with qualifying direct deposits!¹	Open Account for SoFi Checking and Savings On SoFi's Secure Website.
Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC. Rating image, 4.50 out of 5 stars. 4.50/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.	4.10% APY for balances of $5,000 or more Rate info Min. to earn: $100 to open account, $5,000+ for max APY	Earn a bonus of at least $225 after a one-time deposit of $25,000+.	Open Account for CIT Platinum Savings On CIT's Secure Website.
Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC. Rating image, 4.00 out of 5 stars. 4.00/5 Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.	3.70% Rate info Min. to earn: $0	N/A	Open Account for American Express® High Yield Savings On American Express's Secure Website.

Disclaimers

SoFi disclosure:

¹ New and existing Checking and Savings members who have not previously enrolled in Direct Deposit with SoFi are eligible to earn a cash bonus of either $50 (with at least $1,000 total Direct Deposits received during the Direct Deposit Bonus Period) OR $300 (with at least $5,000 total Direct Deposits received during the Direct Deposit Bonus Period). Cash bonus will be based on the total amount of Direct Deposit. Direct Deposit Promotion begins on 12/7/2023 and will be available through 1/31/26. See full bonus and annual percentage yield (APY) terms at sofi.com/banking#1.

² SoFi members who enroll in SoFi Plus with Direct Deposit or by paying the SoFi Plus Subscription Fee every 30 days or with $5,000 or more in Qualifying Deposits during the 30-Day Evaluation Period can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. Members without either SoFi Plus or Qualifying Deposits, during the 30-Day Evaluation Period will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Only SoFi Plus members are eligible for other SoFi Plus benefits. Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet. See the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

³ We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

⁴ SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations.

Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.

⁵ We’ve partnered with Allpoint to provide you with ATM access at any of the 55,000+ ATMs within the Allpoint network. You will not be charged a fee when using an in-network ATM, however, third-party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

⁶ Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

⁷ Overdraft Coverage is limited to $50 on debit card purchases only and is an account benefit available to customers with direct deposits of $1,000 or more during the current 30-day Evaluation Period as determined by SoFi Bank, N.A. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the“30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Members with a prior history of non-repayment of negative balances are ineligible for Overdraft Coverage.

Are credit cards safer than debit cards?

Yes, in many instances. One of the biggest reasons to use a credit card vs. a debit card is security. Credit cards are required by law to offer protection against credit card fraud.

If your credit card is lost or stolen, you're only responsible for up to $50 in fraudulent purchases made before you report it, thanks to the Fair Credit Billing Act. And if your credit card information -- but not your physical card -- is used in an unauthorized transaction, you pay nothing. (It's worth mentioning that most of the top credit cards offer $0 fraud liability regardless of how transactions are made.)

With debit cards, how much you pay for unauthorized charges depends on how quickly you report the card as lost or stolen. If you report a debit card before it can be used, you pay nothing. But the longer you wait, the more you could pay:

Time to report	Maximum potential loss
Before unauthorized charges are made	$0
Within two business days after loss or theft	$50
More than two days after loss or theft, but less than 60 days after you get your card statement	$500
More than 60 days after loss or theft	All money stolen from your account and possibly even from linked accounts

Data source: Electronic Fund Transfer Act, as reported by the Federal Trade Commission (consumer.ftc.gov)

Keep in mind that your liability is limited to fraud committed with your physical debit card. In today's digital world, fraudsters might use your info without stealing your card. In that case, you pay $0 as long as you report the fraud within 60 days.

Credit cards also usually excel when it comes to other types of buyer protections. Some cards offer protection against theft or damage to a purchase within 90 days of checkout. Many credit cards, particularly rewards credit cards, also offer perks like extended warranty protection.

TIP

Have you been charged for a purchase that was never delivered?

You can charge back the transaction on your credit card, but your debit card may not give you the option. The best travel credit cards come with travel insurance that can refund otherwise nonrefundable travel expenses.

Do debit cards build credit?

Debit cards typically don't help you build credit. To build a credit score, you'll want to use a credit card.

To establish a credit score, you can apply for a secured credit card. Secured cards are great for beginners because they're easy to get, even when you have zero credit history. For the same reason, secured cards are typically good for folks with bad credit scores. The downside of secured cards is that they have low credit limits and offer fewer rewards, plus you have to make a security deposit (that becomes your credit limit) to get one.

To build credit as an experienced credit user, consider swiping with an unsecured credit card. That way, you can take advantage of better rewards and higher credit limits. If you have a score above 700, there should be plenty of cards for good credit available to you.

When should you use a credit card?

You should consider using a credit card to dodge fraudsters, earn rewards, and build credit.

Credit cards offer better fraud protection than debit cards. For example, you won't pay more than $50 for fraudsters swiping your card (once reported), but you could be responsible for much more than that if your debit card gets stolen.

Credit cards earn rewards at checkout, and these are typically better than what debit cards offer. You might earn points, travel rewards, or cash back on gas and groceries. These can add up.

Using credit cards can help you build your credit score. So long as you use your credit card responsibly (and make on-time payments every month), your credit score should increase steadily. The benefits of boosting your credit score include cheaper car loans and mortgage payments. Debit cards rarely boost your credit score.

When should you use a debit card?

You should consider using a debit card to withdraw cash and limit spending.

Debit cards typically let you make cash withdrawals. Your bank may let you withdraw cash from ATM networks or cash registers. Oftentimes, it's free. You can use credit cards to withdraw cash, but you'll typically be charged a 5% cash advance fee for doing so.

Debit cards limit your spending to your linked checking account balance. You can't go into debt. At worst, you'll be charged a nonsufficient funds fee for attempting to overdraw. Debit cards make it easier to spend responsibly.

Choosing a credit card

Don't you wish you could take a peek inside a credit card expert's wallet sometimes? Just to see the cards they carry? Well, you can't look in anybody's wallet, but you can check out our experts' favorite credit cards. Get started here:

Best credit cards

FAQs

Debit cards are linked to a bank account, but credit cards are linked to a line of credit. That means you can spend more than you own with a credit card, but you must pay it back later, and you may be charged interest or late fees.
It depends. Credit cards are better for your credit if you pay your bills consistently and on time. If you don't, your credit score will likely go down. Debit cards can't build credit at all, but they also can't hurt your credit.
Yes, some debit cards earn some type of purchase rewards. You can also get sign-up bonuses for some new bank accounts. However, credit cards typically have higher rewards rates for purchases, as well as much better sign-up bonuses.

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Credit Card vs. Debit Card: Which Should You Use?