Credit card vs debit card: rewards, risk and your credit file, in numbers

A credit card and a debit card look identical at the checkout and do very different things behind it. One spends the bank’s money and bills you later; the other spends yours immediately. That difference decides how much you can earn back, what a mistake costs, and whether the card does anything for your credit file. This guide puts real numbers from our catalogue on each of those questions, using cards from both sides of the ranking.

How each one works

A debit card draws on money already in your checking account. The purchase leaves your balance at once, or within a few days. There is no bill and no interest, because there is no loan.

A credit card draws on a line of credit. You owe the issuer, receive a statement, and either pay the full balance by the due date or carry part of it at the card’s APR. Paid in full, a credit card is effectively a free short-term loan with rewards attached. Carried, it is one of the most expensive forms of borrowing a household can use.

Rewards: what each side actually pays

On the credit side, Wells Fargo Active Cash pays unlimited 2% with no annual fee, no categories and no caps, plus a $200 bonus after $500 of purchases in the first three months. On the debit side, the best no-conditions option is Discover Cashback Debit: 1% on up to $3,000 of debit purchases a month, with no qualifying conditions, which tops out at $360 a year.

Debit rewards can go higher, at a price. Upgrade Rewards Checking Preferred pays 2% on common everyday purchases, the highest flat debit rate on our list, but it requires a qualifying direct deposit of at least $1,000 and caps the cash back per category each month. If your paycheck already lands there, that closes most of the gap; if not, the conditions are the cost.

What a mistake costs

The rewards comparison only holds if the credit card is paid in full. Carry a balance and the arithmetic reverses quickly. Citi Double Cash, for example, lists a regular APR of 18.24% to 28.24% variable.

A debit card cannot produce that loss, because there is no loan. Its failure mode is different: spending more than the balance. Accounts handle that very differently. Chime Checking covers debit purchases up to $200 with SpotMe and no overdraft fee; Discover Cashback Debit charges no overdraft or insufficient funds fees. Read the overdraft terms of any account you rely on.

Building a credit history

A credit score is built from how you handle credit. A standard debit card is not credit, so it generally does not appear in your credit file at all, however responsibly you use it. That is the strongest reason for someone with no credit history to hold at least one credit card.

1. 01

   1. Capital One Platinum Secured

   From $49 deposit

   Capital One Platinum Secured · 4.6/5

   Capital One Platinum Secured is a secured credit card with no annual fee, a refundable deposit that may be $49, $99 or $200, and reporting to all three major bureaus every month. Its regular APR is 29.99% variable, so it must be paid in full.

2. 02

   2. Chime Credit Builder Visa

   0% APR

   Chime Credit Builder Visa · 4.4/5

   The Chime Credit Builder Visa spends like a debit card and reports like a credit card: no credit check, no annual fee, no interest and no minimum security deposit. It requires a qualifying Chime Checking Account with a direct deposit.

Our guide to building credit from zero compares the starter options in more detail.

Which one to use for what

1. 1

   Everyday spending you can pay off

   A no-fee credit card such as Active Cash, paid in full every month from checking.

2. 2

   Cash, ATMs and bills that charge a card fee

   A no-fee checking account and its debit card.

3. 3

   If you tend to carry a balance

   Debit, until the balance is gone. Rewards do not outrun a variable APR.

4. 4

   If you have no credit file

   A secured card or the Chime Credit Builder, used lightly and paid on time.