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For many consumers, plastic is the preferred currency when making a purchase. But how does a consumer know if he/she should use a credit card or a debit card?

What is the difference between a credit card and a debit card?

Credit cards use borrowed money from a credit card company. Debit cards use money consumers already have in their bank accounts.

While credit cards can lead to debt if they are not used wisely, consumers should get in the practice of using credit cards for purchases:

  • It is safer to use for making an online purchase. The federal Fair Credit Billing Act protects against billing errors and allows consumers to dispute charges over $50 for unsatisfactory goods and purchases.
  • Debit card numbers can be stolen. Because debit cards withdraw money immediately, bank accounts can be drained before consumers realize their account is compromised.
  • You build a credit history using a credit card; this is not the case with debit cards. Building credit is important as employers, insurance agencies, and future creditors may use the report to obtain information about you. Good credit enables you to purchase a home or car, finance an education, or take advantage of special sales and offers. Bad credit can deny you these same advantages and can have negative consequences, such as being denied a home loan.

debit vs credit

If you do use debit cards, be sure to avoid spending more money than is in your account. This is called overdraft and banks commonly charge a fee. It is worth asking your bank if they offer an overdraft protection program. In this program, your checking account is linked to a second account, such as your savings account, and will take money from the secondary account if a purchase exceeding the funds in your checking account is made. It is also important that consumers keep their debit card PIN a secret. This number provides a layer of protection against misuse of your debit card.

For more information on the difference between debit and credit cards, visit the Federal Trade Commission’s website on managing your money.

If you have additional questions, contact the Office of Consumer Affairs and Business Regulation by calling our Consumer Hotline at (617) 973-8787, or toll-free in MA at (888) 283-3757, Monday through Friday, from 9 am-4:30 pm. Follow the Office on Facebook and Twitter, @Mass_Consumer. The Baker-Polito Administration’s Office of Consumer Affairs and Business Regulation is committed to protecting consumers through consumer advocacy and education.

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