Credit Cards vs. Debit Cards: Pros, Cons, and Security

Many people speak about credit and debit cards interchangeably, as if they were one and the same. They may perform many of the same functions, but they are quite different, and each offers its own set of benefits and drawbacks.

A quick overview of credit and debit cards

Credit cards allow the cardholder to borrow money from the card issuer, within a set limit. A credit card holder is billed each month for both the funds they used and the interest from unpaid balances. Debit cards, on the other hand, only allow the card holder to spend what they already have deposited at the card issuing bank.

Benefits of credit vs. debit cards from the consumer’s perspective

As a credit card holder, a consumer can enjoy several conveniences and benefits. Firstly, a credit card enables more possibilities for online shopping, while most e-commerce sites don’t commonly accept debit cards with the need for an intermediary, unless the debit card also carries the Visa or MasterCard logo. Credit cards can also be safer when it comes to theft and fraud, as they typically have increased security technology and insurance.

May credit cards offer rewards and benefits for card holders, from airline miles, cashback and spending points to extended warranties and low-price guarantees. However, with the added reward benefits comes higher fees. Credit cards commonly have an annual fee and high interest rates, as well as charges for late payments and exceeding card limits. Debit cards do not involve paying interest on the money spent, as the cardholder is using their own money and not borrowing. Apart from the withdrawal fee and over-drawing penalties, most debit cards have no fees at all, and some even give annual cash rebate incentives for higher spending. With a credit card, it is easy to overspend and fall into debt, while a debit card prevents borrowing–although it can be used to spend the cardholder’s last dime.

Using credit vs. debit cards for merchants

Many of the benefits and drawbacks of using credit vs. debit cards for purchases are the same for merchants and business owners as for consumers. By enabling you to spend money directly from your business bank account, a debit card gives you more control over your budget and reduces your risk for debt and overspending. On the other hand, a credit card’s ability to loan money for purchases is more beneficial for a business’s cash flow. Again, a business can also enjoy the better rewards and security that a credit card offers.

Accepting credit vs. debit cards for merchants

Whichever type of card the business uses, the flip-side of the situation involves which cards to accept from customers. The ease with which customers spend too much with credit cards is a “pro” rather than a “con” when considering what cards to accept from customers. But higher rewards can sometimes translate into higher transaction fees for merchants. Still, allowing customers to use debit cards as well as credit cards increase the potential for more sales, as not all customers have credit cards, and some customers may have already reached their credit card spending limit.  To accept debit cards the merchant needs to find a merchant account provider that offers this functionality. The best merchant account providers will provide the facilities for both debit and credit card payment processing, maximizing sales for the merchant and convenience for their customers.

For more information on credit cards vs debit cards, or to sign up for a merchant account, please call (888) 924-2743 or go to


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