You may be wondering what type of bank card you have, and whether it's better to have a debit card or a credit card. Find out how credit and debit cards work, and how best to use your bank cards to avoid paying unnecessary fees.
We look into the different types of credit cards and debit cards to explain the differences and how you should use each of them.
There are two main types of bank card - a debit card and a credit card. They work in different ways.
A debit card is linked to your current bank account and can be used for everyday spending. When you make a purchase using your debit card the money transfers out of your bank account (debits from your account) usually within hours of the transaction, sometimes instantly.
You can tell if your card is a debit card by looking at the right-hand side of the card where it will say “Debit” on either the top or the bottom corner.
A credit card is a bank card that enables you to make purchases now and pay for them later. Credit cards often have high credit limits, based on your personal credit score. This allows you to make large, occasional purchases, such as a holiday or a washing machine. People tend to use credit cards to buy more expensive items and then spread the cost by repaying in full at the end of the month, or over a series of months.
You can tell if you have a credit card because it will say “Credit” somewhere on the card, usually the right hand side. If you want to know if your card is Visa or Visa Debit, for example, you can look on the top of the card on the right hand side.
The same applies to Mastercard and Mastercard Debit, with the word “Debit” appearing on the right of debit cards and Mastercard credit cards often having a very small “credit” printed vertically on the left.
Credit cards don't have sort codes – instead they have a 16-digit number that is written across the face of the card. This is your credit card number and you will need to input it when you are making a purchase online. You will also need the last three digits of the security code, which is printed on the back of the card.
If you have a card with a sort code at the bottom under the name of the account holder, then it will be a debit card. The sort code and account number should match the current account to which the debit card is linked.
How do I know who my card provider is?
Whether your card is debit or credit, there are a few things you will immediately be able to tell just by looking at your card besides the card provider.
The most important is which electronic payment provider your card operates with.
If you are going to remote parts of the world it may be a good idea to travel with both Visa and Mastercard cards to ensure you can access your money.
Knowing whether you have a credit or debit card is crucial to knowing how to spend on that card.
As the names suggest, credit cards are designed for borrowing money from your card provider, while debit cards are there for you to access your own money. If you are unsure you can check with your bank or card provider.
If you need to withdraw money from a cash machine, you should only ever use your debit card, as credit card providers charge for cash withdrawals.
Credit cards are ideal for in-store purchases, or online. If you're planning to use your credit card for big purchases, remember to clear your balance at the end of every month to avoid interest charges.
Credit cards are also far more suitable for large purchases where any dispute or lack of satisfaction with the delivered product is possible. This is because credit cards come with ‘Section 75’ protection.
That means that if you order a product over £100 but below £30,000 and it never arrives, does not work, or is not as described, you should be able to claim the money back through your bank by citing Section 75.
The difference between a debit and a credit card is that with a debit card the money leaves your account quickly after the purchase. Whereas with a credit card you might have up to 56 days before you need to pay it off.
This makes credit cards useful to use if you're making big purchases, or you need to manage your cash flow – for example until you are paid.
Debit cards can push your current account into overdraft if you spend more than you have in your bank – potentially meaning you will have to pay overdraft charges.
Crucially, if you need to withdraw money from a cash machine, only use your debit card, as credit card providers charge for this.
A credit card, meanwhile, is ideal for in-store purchases, or online, but remember to clear your balance at the end of every month to avoid interest charges.
If you can't pay off your credit card at the end of the interest-free period you may be charged interest. You have to pay off a minimum amount even if you don't clear the entire balance.
So both cards have their benefits and drawbacks, but if you use them carefully they can be a great way to manage your money.
There are different types of credit card that can be useful depending on how you spend your money.
Standard spending: The most common credit card is a standard low-APR card designed for everyday spending.
The APR (annual percentage rate) refers to the interest rate charged on the card, the lower the APR the lower the cost to you, but you can avoid paying any interest at all by clearing your balance within the interest-free period (typically 56-day intervals).
To find out the APR on your card you can either contact your card provider, check online, or look at a recent statement.
Interest-free cards: There are also UK credit cards, which have interest-free periods, whereby you pay no interest at all on the money you're borrowing for a longer period of time.
Be careful to clear your balance before this period comes to an end though, or you could wind up paying a lot.
High APR card: If your card has a particularly high APR, it may be an introductory or credit-builder card.
These cards are typically issued to people with limited, or no credit history. But if you stick to the rules and clear your balance each month, you won’t be affected by interest payments – and could improve your credit history in the process.
Reward cards: credit cards that offer cash back, other benefits or are linked to particular providers like Sainsbury’s Nectar and Tesco Clubcard and give you points with purchases.
Cashback cards: these types of cards give you money back on certain purchases.
Check the paperwork you were given when your credit card was issued or ask your card provider.