A credit card borrows the issuer’s money until the statement is paid; a debit card spends your own money straight from your account. The table below sets out the differences, and the sections after it cover cost, protection and credit building. For more on how cards work, see our credit card basics guides.
The differences at a glance
| Credit card | Debit card | |
|---|---|---|
| Whose money | The issuer’s, repaid when the statement is due | Yours, taken from your account at once |
| Interest | None if the statement is paid in full by the due date; otherwise the card’s rate | None |
| Fees | Any annual fee, plus charges such as foreign currency and cash advance fees | Your bank account’s fees |
| Spending limit | The credit limit | The money in your account (plus any overdraft) |
| Rewards | Many cards earn points or cash back | Rare |
| Purchase protection and insurance | Included on many cards | Generally none |
| Credit building | Reported to the credit bureaus | Not reported: debit isn’t credit |
| Cash from an ATM | A cash advance, with a fee and immediate interest | A normal withdrawal |
How a Canadian debit card works in detail, including Interac and the Visa and Mastercard debit networks, is covered in what is a debit card.
Cost
Paid in full each month, a credit card costs only its annual fee, if it has one, since purchases get an interest-free grace period. Carried over, a balance is charged interest at the card’s rate, which is why how credit card interest works matters to the comparison. A card also has other possible charges, set out in credit card fees. A debit card’s cost is your bank account’s fee structure.
Merchant surcharges
The Financial Consumer Agency of Canada (FCAC) says merchants “may add a surcharge to your transaction for using your credit card (except in Quebec),” and “Your purchase may cost you up to 2.4% more.” The surcharge must be disclosed before you pay, at the store entrance and on the receipt. Where one applies, paying by debit avoids it; whether a card’s rewards make up for it depends on the card’s earn rate.
Protection
Unauthorized charges. With a credit card, a fraudulent charge is on the issuer’s money while it’s investigated, rather than gone from your chequing account. With debit, the money leaves your account at once, which can bounce other payments while the claim is sorted out. Both networks have zero-liability policies with conditions, and how a fraud claim works for each is covered in disputing a credit card charge and in your bank’s debit card terms.
Purchases that go wrong. A credit card purchase that isn’t delivered or isn’t as described can be disputed through the card network as a chargeback. Debit purchases don’t have the same process.
Coverage. Many credit cards include purchase protection, an extended warranty, rental car coverage and, on some cards, travel insurance. Debit cards generally include none of these. What each type of coverage does, and its limits, is explained in credit card insurance explained.
Rewards
Many credit cards earn points or cash back on spending, and the credit card comparison lists each card’s earn rate. A few prepaid and debit products pay cash back too. Rewards only come out ahead if the balance is paid in full; a single month of interest on a carried balance can wipe out a year of rewards.
Credit building
Credit card accounts are reported to Equifax and TransUnion every month, so on-time payments build your credit history and a missed payment damages it. Debit card use isn’t reported at all. For someone building credit, a card used lightly and paid in full is one of the main tools; see how to build credit from scratch.
When each is the better choice
| Situation | Usually better |
|---|---|
| Everyday purchases you’ll pay off this month | Credit card, for rewards, protection and credit history |
| Online purchases and large purchases | Credit card, for dispute rights and purchase coverage |
| Travel bookings and car rentals | Credit card, where the card includes coverage (check the terms) |
| Getting cash | Debit card |
| A merchant charging a credit card surcharge | Debit card, unless the card’s rewards outweigh the surcharge |
| Keeping spending to what’s in the account | Debit card |
Many people use both: a credit card for most spending, paid in full each month, and a debit card for cash and for merchants where a card costs extra.