How do credit and debit cards work?
The main difference between credit cards and debit cards is where the money comes from:
- Debit cards are linked to your bank account. When you pay with a debit card, the money comes straight from your balance.
- Credit cards allow you to borrow money from your bank or credit provider. You pay it back later – ideally in full each month to avoid interest.
Which one is better for your credit score?
Using a credit card responsibly can help build your credit score. Lenders see regular use and timely repayments as signs you can repay the money you borrow, which could make it easier to be accepted for credit in the future.
On the other hand, debit cards don’t help to build your credit score because they don’t involve borrowing – they simply let you spend what you already have.
Fees and charges to watch out for
Both credit and debit cards come with potential fees:
- Credit cards may charge an annual fee, interest if you don’t clear your balance each month, and extra costs for cash withdrawals or late payments.
- Debit cards usually have fewer fees, but you might still be charged for overdrafts, using an ATM abroad, or certain types of transactions depending on your bank’s terms.
Security and fraud protection
One major difference between credit and debit cards is the level of purchase protection they offer.
Credit cards generally provide stronger safeguards, and under Section 75 of the Consumer Credit Act, purchases between £100 and £30,000 are covered if something goes wrong—whether that’s a faulty product, a company going bust, or even fraud.
With debit cards, you may still have fraud protection through chargeback schemes, but reclaiming lost money can take longer, and there are fewer legal protections for disputes.
When to use a debit or credit card
Debit cards are best for…
- Everyday spending – Since you’re using your own money, it’s easier to budget and avoid debt.
- Avoiding interest and fees – As long as you stay within your balance, there are no borrowing costs.
- Simple, hassle-free banking – You don’t need to worry about repayments or credit limits.
Credit cards are best for…
- Building credit – Regular, responsible use can improve your credit score over time.
- Big purchases – Section 75 protection offers extra security if something goes wrong.
- Spreading costs – If you need to pay off something over time, a credit card can help – some even offer 0% interest periods, making it cheaper to spread the cost if you pay it off before interest kicks in.
- Travel and emergencies – Some credit cards offer perks like fee-free spending abroad or a backup if unexpected expenses arise.
Which one is right for you?
- If you want to stick to your budget and avoid debt, a debit card is the safer option.
- If you need flexibility, want to build credit, or benefit from extra protection, a credit card could be useful – as long as you use it responsibly.
- Some people use both – a debit card for daily spending and a credit card for major purchases or travel.
Understanding your financial goals and spending habits will help you decide which card suits you best.
Ocean Credit Card
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Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
