Article | 3:13 min read

What's the Difference Between Debit and Credit Cards?

Budget and Save

Learn the differences between debit and credit cards.

Multicolored cards stacked on black background.

Debit and credit cards look almost identical. Each has a 16-digit card number, expiration date, and a personal identification number (PIN). Although, they may look similar, they function in very different ways.

Debit Card

Debit cards allow you to spend money you deposit into your account at the bank. A debit card is a payment card that allows you to complete transactions by deducting money directly from your accounts. You can also use these cards at the ATM to withdraw money from your accounts.

Debit cards eliminate the need to carry around cash or checks to make purchases. Debit cards usually have daily purchase limits, so you may not be able to make an especially large purchase using a debit card. Also, your debit card may decline if there are not enough funds available in the account. Spending more than what’s in your account may incur an overdraft fee.

Debit cards have no impact on your credit score because your account activity is not reported to credit bureaus. Even though debit cards won’t help you build your credit history, there are different types of debit cards which can teach you good money habits. Here are the different types of debit cards – a standard debit card, an Electronic Benefits Transfer (EBT) card and prepaid debit cards.

  • Standard debit cards draw on the available funds in your bank account.
  • Electronic Benefits Transfer (EBT) cards are issued by state and federal agencies to allow qualifying users to use their benefits (such as Food Stamps and Temporary Assistance) to make purchases.
  • Prepaid debit cards give people without access to a bank account a way to make electronic purchases up to the amount that was pre-loaded on the card. You can also reload more money on the card. These cards are helpful for younger children or people who may not want to carry a balance on a card.
  • Other prepaid cards such as Payroll, Unemployment and Child Support cards. These debit cards are reloadable with funds from an employer, unemployment compensation or child support payments.

Credit Card

Credit cards allow consumers to borrow money from the card issuer up to a certain limit in order to purchase items or withdraw cash.[1] When you open up a credit card, the card issuer will give you a credit limit, which is the maximum amount of credit the issuer will extend to you.

If a credit card statement goes unpaid, you can accrue interest charges on the debt that you owe to the bank. Paying your entire bill by the due date is the best way to avoid interest charges.

Your credit score is a numerical value based on several different factors in your credit file. Lenders may use this score in evaluating applications for credit. The FICO credit score, one type of credit score, is based on your payment history, credit usage, age of credit, the type of accounts that make up your credit (credit mix) and any inquiries for new credit.[2]

Figuring out which card is best for you can be a challenge. Here are the types of credit cards that are available from most card issuers.

Credit cards are issued in four categories: standard, rewards, secured and charge cards.

  • Standard cards issue a line of credit to the customer.
  • Rewards cards offer rewards such as cash back, travel points, or other benefits.
  • Secured credit cards use funds from an initial cash deposit that is held by the issuer as collateral to build credit.
  • Charge cards may have no stated preset spending limit, but often won’t allow unpaid balances to carry over to the next billing cycle.

Want more information about credit or debit cards? We are always here to help! Contact us or visit a Central Bank branch to learn more.


[1]. Credit Cards vs. Debit Cards: What’s the Difference, Investopedia
[2]. How Do Credit Cards Work, Investopedia

