Many people make the assumption that credit cards and debit cards are basically the same, and although there are some similarities between the two card types, the main difference has some ramifications that give the debit card some fundamental disadvantages.

Here is the key difference between the two: Credit cards are a financial instrument whereby the consumer borrows money from the credit card issuer. Each time a consumer uses a credit card, he or she is incurring debt. The consumer usually has the choice whether to pay the debt balance in full immediately or to pay it off over a period of time with interest.

Debit cards, on the other hand, are a financial instrument whereby the consumer is using his or her own money that is being withdrawn from an existing banking account that has already been funded.

This major difference means there are 10 disadvantages of debit card use.

Protection against fraudulent use

: Debit cards don't offer as much protection against fraudulent use as credit cards do. While debit cards are offering more protection than they did in the past, the exact protection can vary from one card to another. This is especially true if a debit card has been taken and is not been reported as stolen in a timely manner. It's important to contact your bank to find out exactly what protection you have and what you are liable for in the event of fraud occurring.

Merchant disputes

: If there is a dispute regarding a purchase you make, you are in a weaker position when you use a debit card vs. a credit card. This is because the merchant already has your money when a debit card is used; this is not the case with a credit card. That means that while the dispute is taking place, your money will remain with the merchant and will only be returned if the dispute is mutually settled in your favor at the end.

Personal account

: As mentioned above, you are using money out of your personal account when making a purchase with a debit card. While this in itself may not appear to be a problem, it can have a huge effect when fraud or disputes occur.

While the fraud or dispute may eventually be ruled in your favor, the time it takes to resolve the problem means you will not have that money in your account. This can cause other transactions to default, forcing you to pay substantial fees. If a default occurs, this can trigger universal default from the credit rating services, and the problem can continue to cascade from there. Again, these may all eventually be resolved, but because it is your account, you will need to spend the time fighting the issues all along the way to get them resolved.


: While some debit cards are beginning to offer rewards, they are still far fewer and less valuable than those rewards that credit cards offer.

Money taken instantly

: When you use a debit card, the money is immediately taken out of your banking account. With a credit card, there is a float period between the time you make the purchase and the date the credit card bill is due. This means that you earn a little bit of extra interest on your money when you use a credit card vs. a debit card.

No added services

: Credit cards often come with added benefits, such as extended warranties on products purchased and insurance for rental cars and airline travel. Debit cards do not offer these services, and that means you will have to pay extra for them if you want them.

Tracking spending

: When using a debit card, it can be difficult to keep track of what you purchased if you aren't diligent in writing down everything. Making a mistake on the balance can cause you to think you have more in the account than you really do, and that can ultimately result in accidental overdrafts.

Banks may trick you into fees

: Unfortunately, banks aren't always helpful when it comes to figuring out how much you have in your account. Some banks report your balance from the ATM when you use your debit card as what you have in the bank, plus courtesy overdraft, leading you to believe you have more in your account than you really do. This can cause you to spend more than is in the account and rack up overdraft fees.

Credit history

: Transactions and payments made through your debit card are not reported to the credit agencies like they are with credit cards, meaning that your good habits don't help you build your credit score. With credit scores now carrying greater importance in many personal finance areas, building this good credit is becoming more and more important.

Not always accepted:

Using a debit card as a deposit on a rental car or for a hotel room is not always possible. In the cases where it is possible, many times the vendor will freeze a portion of the money in the account, and this can cause problems for other payments. Even when this money is returned, it can take up to a week to make it back into your account. This can mean that even when you believe you have money, it may not be available for use, and this can cause you to accidentally go over your limit and incur fees.

So there are these disadvantages to debit cards. If you can't control your spending, and if using a credit card will result in you taking on debt, the above points are moot and a debit card is probably a better choice. If, however, you do have the willpower to control your spending, it's wise to weigh the disadvantages of using your debit card before making a purchase with it.

Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and get their finances in order. He currently owns and runs