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Credit Cards vs Debit Cards

By Becca Stanek · September 30, 2022 · 8 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Credit Cards vs Debit Cards

Credit cards and debit cards are two payment options that allow you to leave physical cash at home. While these two types of cards may look the same, they’re actually quite different. A credit card allows you to borrow money to make purchases and pay it back later, whereas a debit card draws on funds in your connected bank account to cover purchases.

If you’re considering whether to get a debit card vs. credit card, know that you don’t necessarily have to choose. Whether to opt for debit vs. credit — or both — ultimately comes down to your financial situation and if you’re comfortable with each product’s pros and cons.

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Credit Cards vs Debit Cards Key Differences

At a glance, here are the major differences between credit vs. debit to be aware of:

Credit Cards Debit Cards
How they work Borrow money from a line of credit to cover purchases and pay amount back later Draw funds from a connected bank account to cover purchases
Credit building Can help build credit through responsible use Cannot help to build credit
Interest charges Will owe interest if a balance is carried from month to month Interest charges don’t apply, as no borrowing is involved
Fraud protection Limited liability for fraudulent activity Fraud protection is more limited
Rewards Opportunity to earn rewards like cash back and travel miles Unlikely to earn significant rewards

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What Is a Credit Card?

A credit card offers access to a line of credit, which means that you are borrowing money that you’ll then need to repay at a later date. With a credit card, you can make purchases, get a cash advance, or do a balance transfer. Credit cards are generally issued by banks, credit unions, or other financial institutions.

Because a credit card represents a loan, it’s necessary to apply and qualify for a credit card. Those with stronger credit will generally have a greater chance of getting approved for a credit card, as well as securing better terms. This can include a lower annual percentage rate (APR) and a higher credit limit, which represents the maximum amount the cardholder can borrow using the card.

Cardholders will owe interest if they carry a balance from month to month. Each month, it’s necessary to make at least the minimum payment in order to avoid late fees and other consequences. However, cardholders who pay off their balance in full each month can avoid interest charges.

There are a number of different types of credit cards to choose from. Some credit cards also offer rewards. A rewards card can offer benefits to the cardholder in the form of cash back, points, or airline miles.

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Apply and get approved for the SoFi Credit Card. Then open a bank account with qualifying direct deposits. Some things are just better together.

The Pros and Cons of Credit Cards

Before using a credit card, it’s important to understand they have both advantages and drawbacks. Here are some of the major pros and cons to keep in mind.


Aside from the fact they allow you to borrow money, here are some of the major pros of credit cards:

•   Robust fraud protections: If your credit card number is stolen online, and you report the theft right away, you’re legally only liable for $50 of any purchases made (or maybe even nothing, if your issuer offers zero liability). Meanwhile, with a debit card, your loss depends on how long it takes you to report the fraud — you could be held completely responsible for the charges on your account. Credit cards also have regulations that protect you from unfair practices. These regulations give you the right to dispute charges if you believe you didn’t make a purchase and allow you to file complaints with your credit card company.

•   Ability to build credit: Another major benefit of using a credit card is that if you use your card responsibly, it’s possible to build your credit history. To do so, you’ll need to take steps like paying your credit card bill on time and keeping your credit card balances low. Having strong credit credit can lead to a number of benefits, such as qualifying for additional loans in the future at more favorable rates.

•   Possible to earn rewards: Some credit cards will even offer rewards for spending money using the card. Cardholders may be able to earn points they can redeem for flights, hotel stays, or gift certificates to popular retailers. Other popular rewards options include cash-back rewards and airline miles.

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Of course there are cons to using credit cards, too. These include:

•   Interest and fees: You only have a select number of days before you have to pay your credit card bill in full, or risk having to pay interest charges. Potential fees vary, but some credit card companies may charge fees if you get a cash advance, make a late payment, or spend more than your credit limit. Some companies or cards may charge annual fees for simply being a cardholder

•   Possible to rack up debt: A big risk of using a credit card is the possibility of racking up a large amount of debt. With a credit card, you’re borrowing money to make purchases rather than relying on funds you already have. If you borrow more than you can afford to pay back, you’ll start to accumulate interest charges, which can quickly snowball into a large amount of debt.

•   Could damage credit: On the flipside, using a credit card also has the potential to wreak havoc on your credit. If you’re not being a responsible cardholder — whether that’s maxing out your card, making your payments late, or skipping out on paying entirely — it can seriously damage your credit score.

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What Is a Debit Card?

While a debit card may look identical to credit cards, it functions differently. Unlike a credit card that uses borrowed money to make purchases, debit cards are generally used to spend money that is already in your connected checking account. You can use a debit card to make purchases or to withdraw money from an ATM.

Most banks or credit unions will give you a debit card when you open a checking account.
When you receive your debit card, you’ll get a PIN, which stands for a personal identification number. You’ll typically need to enter your PIN on a keypad when making purchases with a debit card. This is intended to protect against someone else trying to use your debit card.

The Pros and Cons of Debit Cards

Like with credit cards, there are both upsides and downsides to debit cards to be aware of.


What are the pros of using a debit card? Here are the major benefits to note:

•   Conveniently pay or withdraw funds: Debit cards allow you to spend cash without actually carrying it around. Most stores accept debit cards as a form of payment. You can also use your debit card to withdraw physical cash from an ATM. Depending on the store, you can even ask for cash back when you make a purchase.

•   No interest charges: Another major benefit of using a debit card vs a credit card is that you won’t pay any interest. This is due to the fact that you can’t borrow money with a debit card. Rather, you’re using the money you already have in your connected bank account.

•   Less risk of overspending: It can be easier to control your spending with a debit card than it is with a credit card. Since you’re limited to spending only what you already have in your bank, you’ll have less of a chance of racking up debt.

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There are cons of using a debit card as well. Specifically, these include the following:

•   Limited to spending what you have: When you make a purchase with a debit card, the money is usually taken out of your checking account immediately. This means you can’t rely on a debit card to lend you money, such as if you needed coverage in an emergency or wanted to make a larger purchase.

•   Won’t help you build credit: Another con of using debit vs. a credit card is that you won’t build your credit history when making responsible purchases. However, this also means you can’t hurt your credit history when using a debit card, which is a positive attribute to consider.

•   Less robust liability protections: As mentioned earlier, if there are any issues with charges due to a lost or stolen debit card, your personal liability can be a bit higher than it is with a credit card. It’s especially critical to quickly report any fraudulent activity on a debit card to limit your personal liability.

Choosing Between a Credit and Debit Card

You don’t have to choose between having a debit vs. credit card. Rather, you could have both a debit card and a credit card in your wallet, and then utilize the best features of each type of card to your advantage. As you can see, there are benefits of debit cards and credit cards.

Credit cards can be an effective tool to help you build your credit — as long as you’re able to pay off your balance each month. If you know you can make your payments on time and avoid costly interest charges or fees, you can take advantage of the rewards programs offered by credit cards.

Debit cards can be an option if you want to ensure you only spend the money you have in your bank account. While credit cards are likely safer for online purchases, you can use debit cards at ATMs or retailers to get physical cash. Since your debit card is a direct line to your cash, it’s wise to review the security policies offered by your bank, especially since debit cards do tend to have less robust fraud protections.

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The Takeaway

When it comes to a credit card vs. debit card, perhaps the biggest difference is where the funds come from. With a credit card, you’re drawing on a line of credit to make a purchase. You’ll then have to pay back that amount later, potentially with interest. A debit card, on the other hand, is linked to a bank account and draws upon the funds already in the account. As such, you won’t pay interest, but you also won’t have the chance to earn rewards.

If the benefits of a credit card seem like the right fit for you, it’s important to compare the o options available to you. With the SoFi Credit Card, for instance, you can earn generous cash-back rewards and potentially secure a lower APR through on-time payments. For a limited time, new credit card holders† who also sign up for a SoFi Checking and Savings with direct deposit can start earning 3% cash back rewards on all eligible credit card purchases for 365 days*. Offer ends 12/31/23.

Take advantage of this offer by applying for a SoFi credit card today.

SoFi cardholders earn 2% unlimited cash back rewards when redeemed to save, invest, or pay down eligible SoFi debt. Cardholders earn 1% cash back rewards when redeemed for a statement credit.1
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s

The SoFi Credit Card is issued by The Bank of Missouri (TBOM) (“Issuer”) pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
1See Rewards Details at SoFi.com/card/rewards.
†SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS PROSPECTIVELY BASED ON MARKET CONDITIONS AND BORROWER ELIGIBILITY. Your eligibility for a SoFi Credit Card Account or a subsequently offered product or service is subject to the final determination by The Bank of Missouri (“TBOM”) (“Issuer”), as issuer, pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated. Please allow up to 30 days from the date of submission to process your application. The card offer referenced in this communication is only available to individuals who are at least 18 years of age (or of legal age in your state of residence), and who reside in the United States.

*You will need to maintain a qualifying Direct Deposit every month with SoFi Checking and Savings in order to continue to receive this promotional cash back rate. Qualifying Direct Deposits are defined as deposits from enrolled member’s employer, payroll, or benefits provider via ACH deposit. Deposits that are not from an employer (such as check deposits; P2P transfers such as from PayPal or Venmo, etc.; merchant transactions such as from PayPal, Stripe, Square, etc.; and bank ACH transfers not from employers) do not qualify for this promotion. A maximum of 36,000 rewards points can be earned from this limited-time offer. After the promotional period ends or once you have earned the maximum points offered by this promotion, your cash back earning rate will revert back to 2%. 36,000 rewards points are worth $360 when redeemed into SoFi Checking and Savings, SoFi Money, SoFi Invest, Crypto, SoFi Personal Loan, SoFi Private Student Loan or Student Loan Refinance and are worth $180 when redeemed as a SoFi Credit Card statement credit.

Promotion Period: The Program will be available from 10/1/22 12:01 AM ET to 12/31/23 11:59PM ET

Eligible Participants: All new members who apply and get approved for the SoFi Credit Card, open a SoFi Checking and Savings account, and set up Direct Deposit transactions (“Direct Deposit”) into their SoFi Checking and Savings account during the promotion period are eligible. All existing SoFi Credit Card members who set up Direct Deposit into a SoFi Checking & Savings account during the promotion period are eligible. All existing SoFi members who have already enrolled in Direct Deposit into a SoFi Checking & Savings account prior to the promotion period, and who apply and get approved for a SoFi Credit Card during the promotion period are eligible. Existing SoFi members who already have the SoFi Credit Card and previously set up Direct Deposit through SoFi Money or SoFi Checking & Savings are not eligible for this promotion.


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