credit card vs debit card

Credit Card Vs. Debit Card: What are the Differences?

Understanding the distinction between credit and debit cards is crucial for effective financial management. A credit card operates on borrowed funds provided by a card-issuing bank, allowing you to make purchases or pay bills with the bank’s money, which you are expected to repay. However, this convenience comes with a caveat: if repayments are delayed, interest is charged on the borrowed amount.

On the other hand, a debit card directly utilizes the funds available in your bank account, such as a savings account, for transactions. This means you are spending your own money rather than borrowing from the bank, eliminating the possibility of accruing interest due to late payments.

An additional distinction lies in the impact on your credit history. Using a credit card responsibly and making timely repayments can help build a positive credit history, reflecting your reliability in managing borrowed funds. In contrast, a debit card, which involves only your existing funds, does not contribute to building your credit score, as it does not demonstrate borrowing and repayment behavior.

Understanding these differences helps in making informed decisions about which type of card to use based on your financial situation and goals.

Credit Card vs. Debit Card: Key Differences

Credit card Debit card
Application process Strict due diligence with an applicant’s credit history, background, and assessments of the ability to pay Straightforward, e.g., apply for a savings account for depositing funds and a debit card with a bank 
Credit limit A card-issue bank, on an individual-merit basis, assigns a line of credit to a cardholder. Not applicable. A debit card holder uses funds in his account with a bank.
Fees An annual fee Free
Interest charge Interest is charged on late repayments in a credit card account. No interest charge or late payment fees
Rewards Generous reward programs No reward program
Security A credit card provides product warranties, & fraudulent protection. A debit cardholder should report within a short time, like 48 hours after purchase, suspicious activities for protection.
Transaction types A credit cardholder borrows from a bank to pay for goods or services and repay the funds later. A debit cardholder uses his funds in a bank account to purchase.


What is A Credit Card?

A credit card is an account with a bank credit line to finance purchases of goods or services. A cardholder uses a card issued by a bank or other digital media, such as contactless technology, such as Apply Pay, Google Pay, and Samsung Pay to pay for goods and services. The credit card owner pays back the owed amounts with interest on any late repayments to the bank.

Credit score

You can establish a sound credit history through the prudent use of your credit cards. A strong credit score helps finance larger purchases and other loan borrowing and even reduces interest expenses in the future.

Product warranty and fraud protection

Credit card issuers like Visa and Master offer product warranty and fraud protection to cardholders who report cases to authorities within a certain period.

Read Also: Best Credit Card with No Annual Fees & Best Corporate Credit Card

What is A Debit Card?

A debit card is a payment card for goods and services by withdrawing cash from a cardholder’s savings or checking account with a bank. Unlike a credit card, a person must have sufficient funds in his account to withdraw cash and pay for goods and services through a debit card.

It is not unusual for a debit cardholder to borrow money and incur overdraft fees through a combined current and savings account or others. However, most banks typically allow clients for cash withdrawals only while using debit cards.

Credit Card vs. Debit Card: Which Is Better?

Debt Build-up

Improper spending using credit cards can cause heavy debt you may not afford. Debt caused by addicted spending and impulsive shopping causes headaches to credit cardholders. You should talk to a financial advisor about prudent financial management.

A debit card is a cash card for spending and incurs no debt, or credit cards charge interest. A debit cardholder may avoid obsessive buying problems with this type of card.

Interest Charges

Credit card spending is an advanced use for funds you must pay back later. You must pay back interest charges for late repayments. Careful planning for consumption using credit cards improves your financial well-being.

A debit card usually does not incur interest charges unless you overdraft from a credit line from a bank.

Issuance and Fees

Credit cardholders should pay a joining fee and a yearly fee to continue the use of a card.

Debit cardholders pay annual maintenance fees only after opening a savings account.


Credit card application procedures are complex compared to a debit card. A bank may review your credit history, sources of income besides KYC (know your customer), ID, and address proof before deciding on your application for a credit card.

A debit card is usually a complimentary product when you apply for a savings or checking account. The process is simpler than a credit card when you need your KYC, ID card and address proof only.

Cash Withdrawal

The withdrawal process is the same for credit and debit cards, allowing in-person withdrawals. However, a bank imposes a monthly withdrawal limit and charges a withdrawal fee and interest expense against a cardholder.

Debit cards do not have such fees and restrictions but may levy a daily withdrawal limit.

Transaction Type

A credit cardholder incurs interest expenses when spending as he uses a line of credit from a bank. He repays the amount owed with interest expense to the bank. Moreover, he may pay a late charge or additional interest for delayed repayment.

Annual fee 

Without the facility of borrowing money to spend, debit cards do not charge annual fees or other charges like cash withdrawals. 

Reward programs

Unlike credit cards, debit cards do not provide as many incentive or reward programs as their counterparts. Cardholders use the card as one of the cash payment mechanisms for purchases of goods and services.

Credit build-up 

Debit cardholders will not build a customer’s credit score due to its business nature. A customer should have a good credit record to establish a sound credit tally.

Tips on Using Credit Cards and Debit Cards

Some tips to help you use your cards wisely:

  • Never disclose your personal card information, like password, card no., CVV
  • Keep your personal information in a safe place.
  • Use hard-to-replicate passwords to prevent access to your card accounts.
  • Sign on the back of your card immediately after receipt.
  • Shop in trusted merchants only
  • Prudent and well-planned spending plans are necessary for healthy financial well-being.

Best 5 Credit Cards In Town

DBS logo

1. DBS Live Fresh Card

  • As a credit card made of 85% eco-friendly material, the credit card supports green spending by giving 5% cashback on online and contactless spending.
  • Additional 5% cashback on selected eco-eateries, retailers, and transport services.
  • An extra 0.3% cashback on other spending.
  • Requirements: The cashback program applies for a minimum spending of S$600 per calendar month. The cap on cashback is S$15 for eligible Sustainable spending, S$20 for eligible online spending, S$20 for VISA contactless spending, and S$20 for other online spending for a calendar month.

Citibank logo

2. Citi Cash Back+ Mastercard

  • A 1.6% cashback on spending all year round
  • No minimum spending requirements and no cap on cashback earned
  • An additional 0.4% rebate for Citi Plus customers, primary account holders of the Citi Interest Booster Account
  • Instant redemption of cashback via SMS
  • Up to S$1 million travel protection for purchase of ticket purchase via Citi Cash Back+

OCBC Bank logo

3. OCBC FRANK Credit Card

  • Earn up to 10% cashback on purchases across all categories
  • Earn 8% cashback on foreign currency deals, online or contactless transactions transactions in SGD
  • Earn an extra 2% cashback on selected green merchants
  • Earn up to S$100 monthly cashback on a minimum of S$800 a month

UOB logo

4. UOB One Card

  • Up to 15% cashback on daily spending
  • A savings of fuel expenses up to 22.66% at Shell and SPC
  • An interest rate of 7.8% on savings with a UOB One Account when you spend on a UOB One Card

CIMB Bank logo

5. CIMB World Mastercard

  • Up to 2% unlimited cashback across selected categories with a minimum of S$1,000 a month
  • A 1% unlimited cashback on spending below S$1,000 a month

Best 5 Debit Cards In Town

Citibank logo

1. Citibank Debit Mastercard

  • Cardholders can enjoy cashback benefits by spending in participating in-store or online merchants and top local and cross-border destinations.
  • Customers can use contactless technology like Apple Pay or Samsung Pay to secure payments.
  • Cardholders can access multi-currency transactions for payments and cash withdrawals across Citibank ATMs overseas without conversion fees.

DBS logo

2. DBS Visa Debit Card

  • Up to 4% cashback on online food delivery, local transport, and online purchases of foreign currencies.
  • No foreign exchange fee for a link-up of the debit card with My Account of DBS
  • 5% cashback on dine-out by registering for the Debit Card Dining Promo on PayLah!(valid till 30 November 2023)

OCBC Bank logo

3. OCBC Debit Card

  • Cardholders enjoy 1% unlimited cash rebates on spending across selected merchants, including transport services, online marketplaces, groceries, and fast-food restaurants, while reaching a minimum of S$500 or above a calendar month.
  • OCBC is one of a few banks offering regular promotions, e.g., social events, eateries, and travel to debit cardholders.

POSB logo

4. PAssion POSB Debit Card

  • Up to 9% cash rebates, equivalent to 18x yuu points, with yuu rewards club in yuu merchants.
  • Up to S$20 bus/MRT rebates every month
  • Up to 5% rebates on dining out by registering for the Debit Card Dining Promo on PayLah!
  • Free PAssion membership to enjoy member benefits

UOB logo

5. UOB One Debit Card

  • Cardholders enjoy up to 10% cashback on daily spending, e.g., dining, online shopping, groceries, health & beauty, convenience stores, transport services, and food deliveries.
  • Up to 7.8% p.a. interest income on the deposit of the UOB One Account while spending with a UOB One debit card.
  • Up to 14% savings on fuel at Shell and 20% at SPC


1. Is it better to have a credit card or a debit card?

A credit card suits customers planning to build up a sound credit history, finance more significant transactions, and prefer multiple rewards via spending.

A debit card meets clients tending to meet spending budgets regularly and ditch paying interest on late payments of loans.

Both offer the convenience of contactless spending and shopping protection. You should consider your spending habits and criteria for using funds before choosing a proper card type.

2. Are ATMs used by credit cards or debit cards?

Debit cards are usable in ATMs to withdraw cash, and some banks allow credit cardholders to withdraw money on ATMs.

3. Is a credit card more secure than a debit card?

A credit card offers fraudulent and theft protection to customers to a double-digit dollar loss. At the same time, debit cardholders will likely suffer losses due to theft if not reported to the authorities within 48 hours.


A credit card offers spending convenience and flexibility like cashless spending. In contrast, a debit card offers planned spending with budgets. It is up to your spending habits and criteria when selecting a credit or debit card.

Key takeaways

  • A credit card finances spending using a credit line with a card-issuing bank.
  • A debit card uses a cardholder’s funds in a bank account to pay for goods and services.
  • Credit card shopping may incur interest charges for late repayments. Yet, debit card spending may be limited to cardholders’ funds.

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