Credit cards and debit cards are commonly used to make purchases, but there are important differences that you should know about.
A credit card is like a loan that you can use to make purchases, while a debit card is connected to your bank account and takes money directly from it. If you don’t pay back what you borrow on a credit card, you could be charged high-interest rates.
Both credit and debit cards cost merchants a fee, but merchants prefer cash payments. Using a credit card wisely can help build your credit score, but improper use can harm it. Debit card usage has no impact on your credit score.
If you’re the victim of fraud, both credit and debit cards have liability limits. However, the notification window is shorter for debit cards. Debit cards can be riskier in the short term because thieves can empty your bank account, unlike credit cards where the issuer covers any fraudulent charges.
Credit cards come with fees and charges, while debit cards don’t. Both types of cards can offer rewards, but credit cards generally offer better rewards.
Overall, credit and debit cards have their own benefits and drawbacks, and you should choose the right card based on your financial goals and habits. Use credit cards responsibly, and consider using debit cards for budgeting purposes.