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

The fundamental difference between a debit card and a credit card is where the money comes from when you make a purchase.

Debit Cards: Your Own Money

• Source of funds: A debit card is linked directly to your personal checking account. When you swipe or insert the card, the money is withdrawn immediately from your bank account.
• Spending limits: You can only spend what you actually have in your account. If you try to spend more than your balance, the transaction will typically be declined (unless you have opted into overdraft protection, which often comes with fees).
• Debt risk: Because you are spending your own money, it is very difficult to fall into debt using a debit card. You aren't paying interest because you aren't borrowing money.
• Credit impact: Using a debit card generally does not help or hurt your credit score, as your usage is not reported to credit bureaus.

Credit Cards: Borrowed Money

• Source of funds: A credit card is a line of credit issued by a bank. When you make a purchase, the bank pays the merchant on your behalf, and you are essentially taking out a short-term loan.
• Spending limits: You are given a "credit limit" based on your creditworthiness. You can spend up to that amount even if you don't have the cash in your bank account at that moment.
• Debt and Interest: You receive a bill at the end of the month. If you pay the full balance by the due date, you usually pay no interest. If you carry a balance into the next month, the bank charges you interest, which can grow quickly.
• Credit impact: Credit card companies report your payment history to credit bureaus. Responsible use (paying on time and keeping balances low) is one of the most effective ways to build a strong credit score.

Summary Comparison Table

In short: Use a debit card if you want to keep your spending strictly limited to what you currently have. Use a credit card if you want to build your credit history or earn rewards, provided you have the discipline to pay off the balance in full every month to avoid interest.