Debit Cards vs. Credit Cards

For those new to banking and managing money, a common question is, “What’s the difference between a debit card and a credit card?” Both types of cards look very similar and can be used to make purchases in person and online, making them seem the same, but they are quite different.

What type of card is best for me?

If you are new to budgeting and are trying to control spending, sticking to a debit card might be your best option. With a debit card, you get the ease and simplicity of making card purchases, but spending is limited to what you have in your bank account.

If you need more funds than you currently have in the bank and know you’ll be able to meet your monthly payments, a credit card can be handy to fund larger purchases or help you be prepared for emergencies. Those who are savvy at budgeting and managing their monthly cash flow sometimes use credit cards for routine purchases in order to amass credit card rewards, and they are careful to pay their balance off in full each month.

Both types of cards can be beneficial to have and to use. One type controls your spending and the other gives you access to more funds and builds credit.

How much can I spend?

With a debit card, you can spend up to the available balance in your checking account. This is a great way to control spending because you can’t spend more cash than you have available. And there is no interest charge for using a debit card.

With a credit card, you can spend any available balance up to the credit limit the credit card company has provided. You’ll want to manage your balance wisely, as you’ll need to pay back any amount that you use (borrow) and will also pay any interest charged by your credit card company. Those with little to no credit history may pay higher interest than those with established credit and solid credit history. And, those who are new to credit cards will typically get a lower credit limit than someone with a strong credit history.

Do these cards affect my credit history and score?

Using a debit card, which is pulling money from your bank checking account, will not affect your credit history or credit score. A debit card is not considered a credit tool.

Using a credit card, on the other hand, will absolutely affect your credit history and score. For those new to managing money on your own, getting and wisely using a credit card can be a good way to establish credit and allow the credit bureaus to begin tracking your smart credit usage. Based on how you use your card – making payments on time, controlling the amount of credit used, etc. – you can help to establish a strong credit foundation that will help you later when applying for things like car loans or a mortgage. When using a credit card, it’s so important to not be tempted by your available balance and spend more than you can pay back. Maintaining a credit balance and only making the minimum payment each month can be a slippery slope to years of unmanageable debt.

What’s the bottom line?

Bottom line, both types of cards can be useful and even beneficial. A debit card helps you control spending but doesn’t help build credit. A credit card can help build credit and help with emergencies but spending needs to be managed carefully to avoid unmanageable debt. Both used together can be important building blocks to your financial success. To find out more about Dedham Savings’ Debit and Credit Card options, visit

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