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Credit Cards vs Debit Cards: What’s The Difference?

21 April 2022
• 5 minute read
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Deciding between a credit or debit card? Read on to learn how each one works and find the card that’s right for you.

Credit and debit cards are two of the most popular ways to pay for things. And it makes a lot of sense when you can use both cards online, at local businesses and when travelling overseas. They also reduce the need to carry cash, and both cards can be added to a digital wallet to tap and pay with your smart phone.

While they share some similarities, credit and debit cards work in very different ways.

So, what’s the difference and which one should you choose? To help you decide, we’ll explain how each card works, weigh up their pros and cons, and give you our top tips for using each one.

What’s the difference between a credit and a debit card?

A debit card is linked to an everyday transaction account and only allows you to spend your own money. Credit cards allow you to borrow money and pay it back over time via an approved line of credit.

With a debit card you cannot pay for an item or service if you don’t have enough funds in your account (unless you have an overdraft). Whereas a credit card allows you to cover any expense up to the value of your credit limit and then pay the money back with interest over time.

It’s important to note that the interest rate and conditions may vary, depending on your credit card and the transaction made. The interest rate and attached conditions are essentially the cost of the loan.

The good news is many credit cards have an interest-free period on purchases which gives you some time to pay off the balance before you start accruing interest.

Should I get a credit card or a debit card?

The answer to this question will depend on a few different things, including your personal situation and spending habits.

Credit cards

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When is a credit card useful?

Credit cards can be handy for covering emergency expenses when you don’t have the savings on hand.

Some credit cards offer a rewards program where you earn points for every dollar spent. Many people find this useful as the points can be exchanged for a range of rewards including flights, hotel stays and gift vouchers. You could find yourself being rewarded with a nice holiday simply by using your credit card.

A credit card may also be useful if your income fluctuates, or if you’re paid monthly and need to pay for expenses, or make larger, special purchases such as flights or concert tickets before payday arrives.

Before you apply for a credit card you should review your spending habits and ensure you’re only using the card for purchases you can afford to pay back. If you’re in the habit of overspending on non-essential items, a debit card may be a better option while you get into the rhythm of budgeting and managing your money. You can always apply for a credit card at a later date if you need it.

How do I get a credit card?

Firstly, you’ll need to be over 18 and also meet the provider’s lending criteria. If approved, you’ll receive your credit card in the post (usually within a few weeks).

Top tip: Before you apply, learn how to best use a credit card and how to pay it off.

When is a debit card useful?

Debit cards are often used for everyday purchases such as groceries, fuel, or your morning coffee.

They’re a great option if you’ve recently entered the workforce and are learning how to manage your expenses. Or if you’re under 18 and are looking for your first taste of financial independence.

How do I get a debit card?

If you have an everyday bank account, it’s likely you already have a debit card attached to the account. Alternatively, you can find a bank account and a debit card here.

Can I have both?

Absolutely, as long as you meet the eligibility requirements. Many people use a mix of credit and debit cards to manage and spend their money. Reviewing the pros and cons can also help you decide if using a combination works for you and when you’ll use each card.

Credit card pros and cons


  • Useful for when unexpected expenses arise.
  • Some credit cards allow you to accumulate rewards points you can exchange for flights, travel, or gift vouchers.
  • Many platinum cards offer extra perks such as complimentary travel insurance and purchase protection.
  • In the event of fraud, your personal funds aren’t affected while transactions are disputed or under review.

Top tip: Paying your statement in full each month and staying below your credit limit can help you keep a good credit rating.


  • If you don’t pay your balance off in time, you could end up paying interest.
  • Withdrawing money at an ATM is generally more expensive, due to the cash advance rate and fees.
  • Missing minimum repayments or not making regular repayments can incur fees or harm your credit score.
  • As you’re borrowing money, it’s possible to accumulate debt.

Top tip: If you need to get on top of your credit, a balance transfer may help. Balance transfers allow you to transfer credit card balances from other banks and enjoy a 0% or a heavily reduced rate for a set period of time. If you can pay off the balance in time, you’ll save a lot of money on your interest payments.

Debit card pros and cons


  • Debit cards are seen as ‘less risky’ as you’re spending your own money.
  • A great ‘starter-card’ if you’re under 18 or are learning how to manage your money.
  • Easy to withdraw money at an ATM.
  • Simple application process with no credit checks.

Top tip: If you’re looking to save more money, The Boost can help you save every time you use your Visa Debit card.


  • Debit cards can be inflexible in emergencies. If you don’t have the funds, you have to wait until you do.
  • Some debit cards charge transaction fees or account keeping fees.
  • Lack of extra features such as rewards points or travel insurance.
  • If your debit card has an overdraft, it’s still possible to go into debt.

Top tip: Look for an everyday account and debit card with unlimited fee-free transactions and $0 account keeping fees so you’re not being charged to spend your own money.

Ready to make a decision?

Whether you’re on team credit, team debit, or love a combination of both, we’re here to help.

Choosing a credit card

Choosing a debit card

Important Information

The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

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