What’s the difference between a credit card and a debit card?
So a debit card and a credit card are both cards that you can use to pay for things, but there are big differences between them!
A debit card is directly linked to your bank account. So if you have 1000 dollars in your account and you buy something for 500 dollars, that money is taken out of your account and you now have 500 dollars left. You can only spend what you have in your account and it’ll be declined if you try to go over.
You also don’t get charged interest on what you spend on your debit card, because it’s not a loan. But you can be charged fees for various things.
A credit card doesn’t pull money from your bank account. You’re borrowing money from the credit card company. It’s like a short term loan every time you swipe, so if you don’t pay that balance in full, you’ll be charged interest.
Credit cards do have limits, and you can be penalized for going over the limit, but that limit isn’t tied to what you have in your bank account. You can have 1000 dollars in your bank account, but still have access to 10,000 dollars on the credit card.
Credit cards can also offer better fraud protection. When a credit card is compromised, it’s the bank’s money that has been affected, so it often is easier to get that fraud handled. With a debit card, you still have some protection, but it may take longer to get the money back and you have to jump through more hoops.
Both credit and debit cards have their place in your financial toolkit, and it’s all about knowing how they work and how to use them responsibly!
Learn how to use credit cards properly here!