Debit vs. Credit Explained In 4 Minutes

by Banks

First impressions with a debit card and a credit card are that they look pretty much the same. They both have similar logos like Visa or MasterCard, and can be used in a lot of the same places. How they actually work with your personal finances drastically differs. What differentiates the two cards is who’s money you are actually spending.

With a credit card you are using a line of credit. In other words when you make a purchase for goods or services you are using the bank’s money, and are expected to pay that money back. If you don’t pay back the debt each month in full you will be charged interest. Credit card interest on average is around 29%....OUCH.

On the other hand when you make a purchase with a debit card you are spending your own money from your linked account, which is typically a checking account. There really isn’t any interest or fees with a debit card. When you use a debit card it is simply like using a check and the money comes directly out of your account.


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So why would anyone bother with a credit card when they can just as easily swipe a debit card? Most credit cards offer perks and rewards based on your spending. Some of the benefits include cash back, airline miles, and discounts or gifts from specific retailers. Just know that it doesn’t do you any good to get these rewards if you aren’t paying off your bill and are paying the high interest rates. So if you are using a credit card for its perks be sure to pay off the balance each month.