The difference between credit and debit cards

In this guide we’ll cover the basics, helping you to make the most of your cards.

You can use credit and debit in cards similar ways, but there are differences which are handy to know about, and could influence what you choose to use them for. These include:

  • Card features and benefits.
  • The costs for using your card at home and abroad.
  • Your responsibilities if you choose to use credit.
     

What is a debit card?

  • It’s linked to your bank account. When you use it, money is taken from your account.
  • You’re basically spending money that’s yours, unless you have an overdraft, which is a type of credit linked to your account. Interest and charges may apply to overdrafts.
  • You can use a debit card to withdraw cash from ATMs, or pay for goods and services.

Debit card features

  • Withdraw cash at an ATM – up to £500 per day with a Lloyds Bank debit card, or more in-branch.
  • Request cashback at most UK supermarket check-outs – up to £50 with a Lloyds Bank debit card.
  • Set up one-off and regular payments from your bank account.
  • Debit cards are usually contactless, so you can make small transactions without entering your PIN.

 

More about debit cards

What is a credit card?

  • It’s a standalone account, giving you access to credit that you’ll need to pay back later. Essentially, it’s a form of borrowing.
  • You’re not spending your own money. Instead you’re using a pre-agreed credit limit, which could help you to spread larger expenses and manage everyday essentials.
  • You can use a credit card to withdraw cash from ATMs, or pay for goods and services. Just bear in mind interest and charges may apply.

Credit card features

  • Request a balance transfer from most credit and some store cards. Fees may apply. Do this as part of your application with Lloyd Bank, or afterwards if you prefer.
  • Request a money transfer from your credit card to your UK current account. Fees may apply. At Lloyds Bank, this is only available on selected products and when your account is set up.
  • Set up regular payments through your credit card account.
  • Most credit card purchases of over £100 and up to £30,000 are covered by Section 75 of the Consumer Credit Act.
  • Credit cards are usually contactless, so you can make small transactions without entering your PIN.

 

It may help to have both

Some retailers and service providers don’t accept particular types of credit card. Some don’t accept them at all. A debit card is a good way to make sure you’re not inconvenienced in these situations, without the need and added risk of carrying cash.

The main thing to be aware of is the differing costs of using each type of card, so select one of the topics below to read more.

Understanding the costs

  • One thing which could sway your decision between using a Lloyds Bank credit or debit card, is any additional transaction costs:

    Card transaction type vs costs table

    Transaction type

    Debit card costs

    Credit card costs

    Transaction type

    Cash equivalents, including gambling transactions, using your card to make transactions at casinos, betting outlets and bookmakers, and buying online lottery tickets or gaming chips, share trading or spread betting, buying foreign currency, sending money orders or wire transfers (other than balance transfers or money transfers), buying coins, banknotes or digital currency, paying government or court fines, enforcement penalties, fees or costs, online trading such as share dealing or investments, purchasing or topping up electronic money, payment cards, mobile wallets or account dashboard services.

    Debit card costs

    Free

    Credit card costs

    A cash transaction fee and interest may apply.

    Transaction type

    Cash withdrawals at a Lloyds Bank Cashpoint or branch

    Debit card costs

    Free

    Credit card costs

    A cash transaction fee and interest may apply (this service is now only available at a Lloyds Bank Cashpoint).

    Transaction type

    Cash withdrawals at another cash machine or branch

    Debit card costs

    Lloyds Bank won’t charge, but the owner of the cash machine may. Check for charges before you go ahead.

    Credit card costs

    In addition to any cash machine charges, a cash transaction fee and interest may apply.

    Transaction type

    Card purchases

    Debit card costs

    Free

    Credit card costs

    Free (If you do not pay your balance in full every month, then interest may apply).

    Transaction type

    Buying foreign currency from Lloyds Bank

    Debit card costs

    Free

    Credit card costs

    A cash transaction fee and interest may apply.

    Transaction type

    Buying foreign currency or travellers cheques from another branch, agent, or bureaux de change

    Debit card costs

    Lloyds Bank won’t charge, but other providers may. Check for charges before you go ahead.

    Credit card costs

    In addition to other provider charges, a cash transaction fee, foreign currency fee and interest may apply.

    More about credit card cash transactions

    Browse rates and charges by account type

  • Again, it depends on the terms and conditions of your Lloyds Bank accounts, but additional charges usually apply when using a credit or debit card abroad.

    Read about using your debit card abroad

    More about using your credit card abroad

Extra protection on credit cards

Most credit card purchases of over £100 and up to £30,000 are covered by Section 75 of the Consumer Credit Act 1974, which means you could claim a refund if something you’ve paid for is faulty, doesn’t arrive or isn’t as described.

This protection doesn’t apply to debit card purchases.

Read about Section 75 protection

Other things to consider

The cost of convenience

Credit cards give you the flexibility to buy now and pay later, which could be especially helpful when you need to cover unexpected costs you hadn’t budgeted for.

It’s just important to remember that interest usually applies to all forms of credit. The cost of borrowing really depends on the terms and conditions of your credit card, or any arranged overdrafts on your current accounts, so make sure you understand those before you spend.

If you have a credit card with a promotional rate on purchases, you could take advantage of that and spread your repayments, but remember to keep an eye on the offer expiry date. If you haven’t repaid your balance by then, your standard interest rate (at that time) will apply to any remaining balances.

Read about current account overdrafts

Information about fees and rates

Of course, if you can afford to pay without borrowing, e.g. using your current account balance or savings, that’s usually the cheapest option.

Manage credit carefully

If you choose to use a credit card, there are a few important things to consider:

  • Will you be able to repay what you’ve borrowed, even if your circumstances change?
  • Unless a 0% promotional rate applies, to avoid paying interest on purchases you need to pay off your monthly statement balance in full and on time every month.
  • As well as fees and charges, your credit record could be affected if you miss a payment or go over your credit limit.
  • You must make at least the minimum payment on time each month, but we recommend paying as much as possible to reduce your balance and the amount of any interest you pay overall. This could also help you to avoid falling into persistent debt.

Key points about credit and debit cards

  • A debit card is linked to your bank account. It’s usually your money that you’re spending or withdrawing, unless you have an overdraft, which is a type of credit linked to your account.
  • A credit card is a standalone account giving you access to a pre-agreed credit limit. When you spend or withdraw cash, you’re borrowing money you’ll need to pay back later.
  • Any transaction costs can vary between credit and debit cards, so it’s helpful to understand the fees and charges which may apply, both at home and abroad.
  • Interest may apply to any amount of money you borrow, either using a credit card or overdraft.
  • If you choose to use credit, it’s important to manage your account and payments well to avoid additional fees, charges and any impact to your credit record.

Where next?

Credit card basics

Related guides

Looking for a card

Important legal information

Lloyds Bank plc. Registered office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales No. 2065. Lloyds Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278.