What's the difference between a debit and credit card?

Debit cards are used to pay for goods in shops and to withdraw money at cash machines. The money is automatically taken from your current account when you spend it, so you must have enough money in your account or an agreed overdraft to cover the transaction. Some of our debit cards are now contactless, which means you don’t need to enter your PIN if the purchase is for less than £30. .

A credit card, such as Barclaycard, isn't linked to your current account and is a credit facility that enables you to buy things immediately, up to a  pre-arranged limit, and pay for them at a later date. The cost of the purchase is added to your credit card account and you get a statement every month.

You then have a choice of paying off the bill in full by a set date with no interest or paying at least a minimum amount and spreading the repayments over a period of time. You’ll have to pay interest on the balance if you do this, therefore, the quicker you pay off your balance, the less interest you’ll pay. 

Choosing a credit card

When you’re deciding which credit card to get, ask yourself this question: Will I be paying interest on my debts?

If you pay your credit card balance in full and on time each month, you won’t be charged interest. In that case, it’s worth it to get a credit card with rewards. These cards give you points, cash or airline miles every time you use them. However, rewards cards have higher interest rates — high enough to wipe out the value of the rewards you earn. That brings us to what to do if you do carry a balance (in other words, you don’t pay off your debt every month). You’ll want to minimize your interest payments, so you should pick a credit card that has a low interest rate.

Your credit card is issued by a bank, such as Bank of America, Chase or Wells Fargo. The bank determines your interest rate, fees and rewards, so it’s important to find a bank that offers a card you like. Transactions  are processed on a network, like Visa, Mastercard or American Express. The network doesn’t really affect the features on a card, except for such perks like rental car insurance or price protection. However, the network determines where the card is accepted.

In general, the better your credit score, the better the cards you can qualify for. The most generous rewards rates, the best perks and the lowest interest rates are available to those with excellent credit.