Debit or credit? What to know when it comes to online shopping

Feb 1, 2021

If you are one of the millions of people planning to shop online this year, it will be vitally important to make sure you’re doing it wisely. One of the most important questions you should ask is, credit or debit?

What’s the difference?

A debit card is similar to a credit card in that it can be used to make purchases at millions of locations worldwide. But there’s one important difference between the two.

A credit card essentially gives you a small loan, letting you pay later for the purchases you make now. If you pay it back right away, it won’t cost you any more than the initial purchase. However, if you can’t pay it off that month, you’ll be charged interest, meaning you ultimately pay more. Whether you pay it back immediately or take your time, using a credit card and paying it off builds credit. That means when you need a good credit score for a big purchase – think, a car or a house – you’ll have it already, just by virtue of your normal, everyday purchases.

By contrast, a debit card purchase is immediately deducted from your checking account – there’s no borrowing, so no credit check is required to get a debit card, you won’t incur debt and there are no interest charges or late fees. However, because the money comes out immediately, if you try to spend more than you have in your account, you could incur an overdraft fee1 depending on how your account is set up. Keep in mind, also, that your card may have a limit on how much you can spend each day.

Which is more secure?

You know that new microchip on the end of your credit and debit card? It’s designed to make it harder for someone to fraudulently collect your card information. The bad news, and what you may not know, is that technology doesn’t extend to online purchases.

The good news, though, is that card purchases still carry certain protections online.

Federal protections are greater for credit card purchases. Thanks to the Fair Credit Billing Act, if your credit card number is used to make a fraudulent purchase and you report it within 60 days, your liability is capped at $50.

Also, if your purchase arrives broken, doesn’t arrive or if the wrong item arrives, you are able to dispute a charge or withhold payment. All card issuers will help you file a dispute but credit card companies are especially helpful. Think about it this way: With a debit card, the money has already come out of your account, so it’s your money on the line. With a credit card, the card company’s money is on the line – which situation will they work harder to remedy?

With debit cards, because the funds come out of your account immediately, fraud could cost you everything you have – plus overdraft1 charges if the thief tries to use more than you have. City Bank mitigates this with daily limits and the option to opt out of overdraft completely but this may not be the case for all debit cards. Under the Electronic Funds Transfer Act, if your card is Compromised –– you have 60 days to report a fraudulent charge with no liability. Remember, though, that 60 days begins on the first day of the statement period in which the charge occurs, so you need to monitor your statements carefully.

Which is the better choice?

A credit card almost certainly offers more fraud protections, but not everyone can get a credit card. If you don’t have a credit card, you can still limit your potential loss by taking a few simple steps. One option is to limit the amount of money in the account you’re spending from, so no more money is at risk than you intend to spend immediately. Another option is to use a prepaid card onto which you’ve loaded only a set amount of money.

You should know, using a debit card works slightly differently for online purchases than for purchases in stores. Unlike purchases at a checkout counter, you will have the option to provide your personal identification number, or PIN. Online purchases are processed as a “credit” transaction, meaning funds may be pending on your account until hard posting about 2 – 4 days later.

City Bank, like most credit card issuers, offers rewards on their cards2. This could be in the form of cash back, travel rewards or some other benefit. Why not cash in on your spending, especially if you plan on paying it all off at the end of the month.

Another point to consider is where you’re shopping. If you’re shopping from a reputable, well-known online retailer, the debit vs. credit card debate is probably a moot point, as the company likely will work to rectify any problems without involving your card issuer. But if you’re buying from a company you aren’t familiar with, a credit card might be the way to go.

So, which is the better choice? In short, it depends on the situation and, especially, on you. If you’re more likely to overspend while shopping, it might be a better idea to use a debit card to limit yourself. If you’re more concerned about potential fraud, a credit card might be the better call. Don’t hesitate to contact your local City Bank representative for more info on our Credit and Debit Card offerings.

Either way, happy shopping!


Here are some tips to make the most out of your online shopping experience:

·      Check the URL. Sites that begin with https:// and show a locked padlock icon in the URL space have added security measures to protect your card information. Sites that begin with http:// do not. Remember, no “s” = not secure.  

·      Use a secure Wi-Fi connection. Not sure if it’s secure? Wait until you’re at home or work to do your online shopping.

·      Use common sense. If a website seems unprofessional or if something just feels wrong, it probably is.

·      Be vigilant. You can’t fix fraudulent charges if you aren’t looking for them, so check your account regularly.

·      Pay off your balance. If you pay your credit card balance every month, in full, you will never have to pay interest. This ultimately could save you lots of money.


1Always a discretionary service: Overdraft Protection does not constitute an actual or implied agreement between you and City Bank. 2Subject to Credit Approval. Ask for details.