If you’re tossing up between a debit card and credit card – but can’t decide which one is right for you – this would be a good time to get some more information about what each option offers. Lucky you’re reading this post then.

Whether you’re thinking about cutting up your credit cards and considering whether a debit card can offer a viable alternative, or you simply want to know how debit and credit cards work so you can make an informed decision when you apply, this is the place to be.

So, let’s get into it. Debit cards vs. credit cards. What you need to know.

What’s the difference?

When you look at a debit card and credit card side-by-side, it’s pretty hard to tell them apart. They are both likely to have a Visa or Mastercard symbol in the corner, a magnetic stripe on the back, and a bunch of numbers on the front. You can use both cards to pay for stuff online and in person, and although it’s not recommended on a credit card, you can use both cards to withdraw cash.

But, while they may look and act the same, debit cards and credit cards work in very different ways.

With a debit card in hand, you are using your own money to pay. How does this work exactly? A debit card is usually linked to an everyday account, so when you use it, funds are removed directly from that account to cover the cost of the transaction.

A credit card, on the other hand, offers you the opportunity to pay with credit. That means, even if you don’t have the money to pay for something upfront, you can cover it with your credit card, to then pay it off later. While this can be handy, you may end up paying interest on your balance if you don’t pay it off at the end of your statement period.

Why use a debit card?

With a debit card, you keep things simple. You use your own money to pay for the stuff you want, and you don’t have to worry about spending more than you can afford to pay back. Debit cards also tend to cost less in fees, and are typically attached to an everyday account than you can manage via online banking or an app.

In terms of features, debit cards generally provide only the necessities, such as security and payment features (think contactless). However, there are ‘platinum’ debit cards that offer more enticing perks, which can measure up to those offered on platinum credit cards. Note, these typically come with a higher monthly or annual fee.

Why use a credit card?

There are two main reasons to use a credit card: access to credit and access to features. With a credit card, you can pay for things you need now, and then pay them off later. This can be useful, but it’s important to make sure you don’t get in over your head.

As for features, these can range from airport lounge access and free flights, to hotel perks and complimentary insurances. Credit cards can also let you earn rewards, helping you get something back on your spending. With all that in mind though, it’s worth noting that credit cards tend to come with higher fees – and they charge interest.

How do you know which one to choose?

Before you decide which one is right for you, think about what you want from your card – or what you want to achieve. A debit card could work for you if you want to keep it simple while keeping costs down, or if you want to reduce your temptation to spend. A credit card may be worth exploring if you want the benefits of buy-now-pay-later, while also enjoying extras such as rewards.