Credit Card vs. Debit Card: What's the Difference Between the Two?

Canadians and credit cards go hand in hand. Credit card debt rose to $90.6 billion in February 2020.

This makes many people wary of using credit cards. They focus on debit cards or alternate ways of paying for expenses. When you are looking to buy things, you should consider the credit card vs. debit card debate.

What exactly are credit cards and debit cards? What are the advantages of using each one? What are their differences, and when should you use one or the other?

Answer these questions and you can create a strong financial future for yourself. Here is your quick guide.


The Essentials of a Credit Card

Financial institutions offer lines of credit to individuals. A line lets an individual draw on the institution, relying on their resources to pay for things.

A credit card is a tool that a person uses to transfer money and acquire debt. It does not store money in and of itself. It places charges on a person’s account, which they must pay later.

Credit card companies draft elaborate contracts for users. A contract specifies how much debt a user can acquire, how they pay off the debt, and what they can use the credit card for. The user must conform to this contract in order to receive services.


Credit Card Types

There are a few different kinds of credit cards. In order to settle the credit vs. debit card debate, you have to be mindful of the differences between credit cards.

Standard Cards

As the name suggests, standard cards offer basic services for users. They extend lines of credit and allow users to make purchases and transfer money.

A user may make payments on their card once a month or quarter. They do not have to pay annual or additional fees unless they fail to pay their previous debts.

Premium and Rewards Cards

Premium and rewards cards offer additional services. A user can earn points as they use the card. The bigger purchases they make with the card, the more points they garner.

They can use these points for a number of services. They can buy items with the points or get cash for them.

Some companies extend services to their premium card members just for having a premium card. They may provide access to airport lounges or concierge services.

Premium and rewards cards come with annual fees. Combined with the monthly payments on the card, expenses can be very high.

Balance Transfer Cards

A balance transfer involves moving debt from one card to another. A person may do this in order to reduce the interest rate they have to pay.

Companies are aware that many consumers take out new credit cards just to transfer debts. A balance transfer card is designed for such a transfer.

The card has an interest-free introductory period. The period may be a few years long, giving the user time to transfer their debts.

There may be a transfer fee or a limit to how much debt they can transfer, but they will not have to pay interest. Once the transfer is made, the card functions as a standard credit card.

Secured Credit Cards

A secured credit card requires an initial cash deposit from the user. The credit card company holds onto their deposit as the person uses the card.

Most secured credit cards extend lines of credit equal to the deposit. Someone who pays $1,000 receives a $1,000 line of credit.

Secured credit cards allow people with a weak credit history to receive services from credit card companies. They also make it easier to track expenses and manage spending habits.

Charge Cards

Charge cards are interest-free cards without spending limits. Yet a user must pay their balance in full before the end of the month. If they don’t, they have to pay high fees.

Very few companies extend them, and very few customers receive them. Credit card companies are most comfortable offering them to corporations with good credit histories.


The Benefits of Using a Credit Card

A credit card has several benefits. It allows a user to build a credit history, which they can leverage for purchases and perks. A bad credit history can make someone seem less credible, but a good history always helps.

Credit card companies work to make their cards secure. Someone who loses their card does not have to pay for expenses acquired on it. Some companies work with manufacturers to offer warranties on purchased products.

The drawbacks of a credit card have to do with spending habits. A person can rack up debt without an easy way to track it.

Interest rates and fees can be extensive, especially if a person does not pay debts on time. But young adults who follow important financial tips can avoid running into problems.


Debit Card Essentials

A debit card connects to a person’s private checking account. When a user pays something with their card, money comes out of their account. They do not acquire debt or a loan.

When someone pays with a card, they may be asked to provide a personal identification number (PIN). This is a number that only the user knows. It adds an additional layer of protection in case the card is stolen, but it may make the card hard to use.

There are only a few types of debit cards. Most debit cards are standard, drawing on bank accounts without extensive fees or additional services. Individuals can buy prepaid debit cards with preloaded money on them so they do not have to rely on banks.


The Benefits of Debit Cards

Debit cards have minimal fees. There may be expenses for withdrawing money from an ATM or making large purchases.

But there are no regular fees that a person has to pay. A bank will not deactivate a card because a person has not used it in a while.

A person can track their expenses easily. They can check their bank account and see how much money they have. They can then adjust their spending habits.

Debit cards also contain fraud protections. A user can talk to their bank about expenses that someone else made on their card and get them nullified.

The main detriment of debit cards is their lack of rewards. A person cannot build up points or create a credit history with one.


Differences Between Credit Cards and Debit Cards

The biggest difference between a credit and debit card is fees. Credit cards charge many different fees, namely for late debt payments. Debit cards have no major fees unless a person drains their bank account.

Yet the fees for credit cards go toward rewards. A user can access a number of services, especially for travel. Debit card users have no rewards, no matter how much they spend.

Credit cards contribute toward credit histories. Debit cards do not. This may be a good or bad thing, depending on a user’s spending and payment habits.

Credit cards allow users to make purchases when they don’t have any money. They do need to have money in order to pay their debt, but not right away. An individual must have money in their bank account in order to use their debit card.

Credit cards and debit cards do have similarities. They allow a person to pay for things without needing dollar bills or coins. Both extend liability for theft and fraudulent purchases.


Paying With Credit or Debit

When in doubt, someone can have credit and debit cards. This gives them two ways to pay for services and purchases.

A young person can prioritize their credit card so they can build a credit history. This will also give them time to put money into their bank account and learn how to start investing. As they get older, they can transition to a debit card so they can avoid harming their credit history.

But someone with spending problems can prioritize their debit card from an early age. As they learn more about saving money, they can switch to their credit card.

Someone moving to or visiting Canada can use a foreign-issued card. But they should be mindful of tips for using cards in Canada.

Some foreign-issued debit cards may not work, and there may be high expenses for converting currencies. They should switch to Canadian cards as soon as possible.


Resolve the Credit Card vs. Debit Card Debate

The credit card vs. debit card debate is extensive. Credit cards allow users to borrow money from banks and financial institutions. A person has to pay their debt off, and they may pay additional fees for other services.

Debit cards draw money out of a user’s personal bank account. There is no debt that a person has to pay off. Yet they do not build a credit history or receive points for services or benefits.

You can take out one of each and use them when you like. provides great cash loan opportunities. Request a loan today.

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Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
  • Repay in up to 90 to 120 days
  • $500 short-term loans