Debit cards and credit cards may look the same, but they offer very different features. Find out more about debit cards vs. credit cards and compare your options here.
A debit card is a type of payment card that allows you to use your own money to make purchases at the checkout, over the phone or online or overseas. Most debit cards in Australia are part of the Visa or MasterCard networks, which are accepted at millions of locations around the world.
Debit cards may be linked to a transaction account, or bought as pre-paid options that allow you to load and spend cash as you need it.
In comparison, credit cards allow you to borrow money up to a certain amount and then pay it off over time, with interest charges. Here, we look at both the similarities and differences between debit cards and credit cards to help you understand how both of them work, compare your options and choose the right types of cards for your needs.
Debit Card Comparison
To find out more about debit cards, have a read of our comprehensive debit card resources. Read our guide to VISA Debit Cards for an in-depth explanation and comparison between VISA Debit Cards.
Debit cards vs. credit cards
Almost everyone with a bank account has at least one debit card – and many people also have credit cards. While you don’t need to have both types of cards, they each provide different benefits depending on how, when and where you use them.
With that in mind, it’s important to compare debit cards and credit cards so that you understand their similarities and differences, as well as the pros and cons of each. That way, you can decide what type of cards you want in your wallet.
Similar features of debit cards vs. credit cards
While a debit card is not a credit card, there are lots of similarities between these two types of cards. We’ve outlined some of the key debit card features that are similar to credit card features below.
- The Visa and MasterCard networks.
Debit cards issued by all the major banks in Australia are part of either the MasterCard or Visa payment network. As well as allowing you to make payments at the checkout and to get cash out at ATMs, MasterCard and Visa cards can be used for payments over the phone, online and overseas at the thousands of locations where Visa and/or MasterCard are accepted. Similarly, most credit cards issued in Australia are Visa and MasterCard options.
- Contactless payments.
Visa and MasterCard have both developed services that allow you to make payments at the checkout by simply waving or tapping your card against a reader. You can do this with any Visa payWave card or MasterCard PayPass product, regardless of whether it is a debit card or credit card.
- Account fees. Many debit cards come with monthly account fees – or loading fees in the case of prepaid options. Similarly, most credit cards have annual fees. There are also cards in both categories that never charge fees, as well as some options that will waive these costs under certain circumstances. For example, most banks waive monthly fees if you have your salary deposited into the transaction account that’s linked to your debit card (and it meets the minimum amount required), or if you sign up for a new credit card that offers a $0 annual fee for the first year before charging the full amount.
- International transaction fees. Most debit cards charge you a fee when you use it to make purchases in a foreign currency. This currency conversion fee is usually around 2% to 3% of the total transaction for debit cards. But there are some debit cards that charge low or no foreign transaction fees. In comparison, most credit card international transaction fees are between 2% and 3.5% of the transaction cost – and there are also some credit cards waive this cost.
- Other fees. Debit cards may come with a number of other fees, including charges for using ATMs outside of the bank’s network, printed statement fees, and dishonour fees if transactions are declined. Credit cards often carry similar fees, but it’s generally easier to avoid these charges with a debit card.
- Security features. Most debit cards now come with chip-and-PIN technology that encrypts and protects the data stored on the card. When you insert, swipe or make a contactless payment with your debit card or credit card, it is also processed via a secure network. In addition to these security measures, Visa and MasterCard products include a Zero Liability Policy to protect you against fraudulent charges. Many banks that issue both debit cards and credit cards also offer fraud monitoring services.
- Entertainment offers. Any card that’s part of the Visa or MasterCard network will give you access to unique entertainment and dining offers through Visa Entertainment and MasterCard Priceless Cities, respectively. These programs are free for eligible cardholders to use, with offers including pre-sale and discounted tickets, restaurant bookings and exclusive shopping discounts.
- Rewards programs. While there are more credit cards that allow you to earn reward points for your spending, there are also debit cards linked to rewards programs. The debit MasterCard that comes with the Bankwest Qantas Transaction account, for example, offers 5 Qantas Points for every purchase made. Meanwhile, debit cards from banks such as ING Direct have offered cash back when you make contactless payments (although these offers may have limited timeframes).
|Debit cards||Credit cards|
|Access to your own money||Access to a line of credit|
|No interest charges||Interest charges are applied if you carry a balance|
|Multicurrency travel card options||No multicurrency options – overseas spending is always converted from AUD|
|No credit check required||Credit check required|
|Options for children and teenagers||You must be at least 18 to get a credit card in your name|
|Options for joint debit card accounts||Very few credit cards offer joint accounts|
Types of debit cards
Just as there are many different types of credit cards to compare, there is a wide range of debit cards you can choose from. We’ve outlined details for the key options below.
Everyday debit cards
These debit cards are typically linked to an everyday transaction account and give you access to your money. With an everyday debit card, you can spend up to the amount of money available in your account.
Some everyday debit cards may also give you access to several linked accounts. For example, if you have both a transaction and cheque account that are linked with your bank, you may be able to use your debit card to access money from both accounts by selecting “cheque” or “savings” at an ATM or checkout.
Most everyday debit card accounts are fee-free if you deposit a certain amount each month, such as $2,000 or your salary from work. But even if you don’t meet these requirements, the monthly fees for everyday debit cards are usually less that $10.
Debit cards for children, teens and students
There are a variety of debit cards available for children, teens and students. These cards are usually linked to low or no fee transaction accounts, giving young people convenient and affordable access to cash without the same “fee free” conditions of everyday debit cards for teens for adults. You can also get prepaid cards for teenagers, which could be handy as a beginners budgeting tool or for overseas holidays.
Prepaid debit cards
Prepaid debit cards allow you to load and use money without the need for a linked bank account. Instead, you choose how much money you want to put on the debit card, and can then spend up to that amount. Some prepaid debit cards are reloadable, which means you can use them on an ongoing basis. Others, such as prepaid debit gift cards, can only be used until the balance of the card reaches $0.
Travel debit cards
Travel debit cards are designed to save you money when you go overseas by limiting or waiving international transaction fees. Some travel debit cards are linked to everyday accounts, such as the Westpac Choice or Bankwest Platinum Debit MasterCard, which both offer no fees for ATM withdrawals overseas.
But there are also prepaid travel debit cards that allow you to load and use money in multiple currencies. Known as multi-currency travel cards, these options help you save on international transaction fees and give you the chance to lock in competitive exchange rates before you go away.
Rewards debit cards
There are both everyday debit cards and prepaid debit cards that offer you rewards for using your card. For example, the Bankwest Qantas debit MasterCard is linked to an everyday transaction account and earns Qantas Points for spending as well as for the monthly balance of the account.
Meanwhile, the Qantas Cash and Velocity Global Wallet are prepaid travel debit cards that are both linked to the Qantas and Velocity frequent flyer programs. These reward debit cards both offer 1 frequent flyer point per $2 spent in Australia and 1 point per $1 spent overseas. These reward earn rates are on par with many frequent flyer credit cards but don’t have the same fees.
Business debit cards
A wide range of business bank accounts give you the option of either Visa or MasterCard debit card. Depending on your bank, you may also be able to get additional debit cards for employees.
Business debit cards and bank accounts offer many similar features to everyday transaction accounts. They may also offer specialised options for your business, such as itemised statements or complimentary legal and accounting services.
While debit cards and credit cards both offer cashless ways to make payments and have many similar features, you don’t need to borrow money to use a debit card. Instead, you use your own money from a bank account or by loading it on to a prepaid card. Now that you understand more about the differences between debit cards and credit cards, you can compare your options and find the right products for all your banking needs.Back to top