Credit cards vs debit cards: what you need to know

What is the difference between credit cards and debit cards?

The key difference between credit cards and debit cards is that debit cards withdraw direct from your bank account, so you’re spending your own money (unless you have an arranged overdraft). Credit cards, on the other hand, are a means of borrowing money that you repay later. You’ll be able to spend up to a pre-agreed limit and you’ll be charged interest if you don’t clear your balance in full each month. You can also be charged interest on some transaction types from the date they are made until they are repaid in full.

There are different types of credit cards available, including:

Rewards credit cards – these cards help you earn Rewards points as you spend.
0% interest credit cards – you won’t pay interest on whatever transaction type the 0% rate applies to for a set period, this could be purchases, or balance transfers, for example.
Balance transfer cards – you can move your credit card debt to another card which may have a lower introductory rate and fees.

Credit and debit cards both come in handy in certain situations. For example, credit cards can help you spread the cost of large purchases, while debit cards are better for withdrawing cash as you’d usually be charged a fee to use your credit card.

Advantages of using a credit card

Credit cards can be a convenient and flexible way to pay. Plus, if used properly, they offer a number of advantages. Some common credit card benefits include:

Spreading the cost of big purchases – if you need a big ticket item like a new sofa or washing machine, you can spread the cost over a number of months, allowing you to manage your budget effectively.
Borrowing without paying any interest - if you pay off your balance in full every month, you won’t pay any interest on your purchases, even with a traditional credit card. But remember, if you can’t pay the full amount, you will be charged interest which can soon add up.
Extra protection – under Section 75 of the Consumer Credit Act, when you buy using your credit card, your provider is jointly liable with the seller if there are certain issues with your purchase. If goods are faulty, don’t match the product description or never arrive, or the company goes bust before you receive your item, you may be able to claim your money back via your card provider, as long as the amount is between £100 and £30,000.
Helping out in emergencies – whether it’s your car breaking down or the boiler needs replacing, credit cards can help you cover unexpected costs without having to take out a loan.
Building your credit history – even if you don’t need to borrow, spending on a credit card and paying the balance off in full each month is a great way to boost your credit score as it shows lenders you can make regular repayments.

However, it’s important to remember there are credit card disadvantages too, especially if you spend beyond your means. If you can’t pay off your balance each month you’ll accrue interest and your debt will continue growing. Your credit score will also be negatively affected if you miss repayments.

Are credit cards safer than debit cards?

When it comes to credit card vs debit card security, credit cards do offer some extra protection. As mentioned above, they offer protection under Section 75 of the Consumer Credit Act, which means they may cover the cost if a purchase goes wrong and the seller has gone bust or isn’t offering appropriate compensation.

However, debit cards do offer some protection under chargeback, which is when you can ask your card provider to give you a refund if your goods or services don’t arrive, are faulty, or are not as advertised. Chargeback can also be used on credit cards and prepaid cards. However, it is a voluntary scheme rather than a legal protection like Section 75.

Both credit cards and debit cards also offer fraud protection. If your card is lost or stolen, the Consumer Credit Act 1974 means you’re not responsible for any unauthorised purchases as long as you report the loss or theft of the card promptly.

Find out more about M&S Credit Cards, and what benefits and rewards you could enjoy shopping through us.

Updated July 2023