Both have 16-digit card numbers, expiration dates, and PINs. Both are used to buy things at stores and online. But debit cards draw funds from your bank account, whereas credit cards let you borrow money from the card issuer up to a preset limit. But both offer a ton of convenience and protection.
Credit cards: Credit cards are issued to you by financial institutions like banks to let you borrow funds from them. You pay the money back with interest. There are standard credit cards that extend you a line of credit to let you buy things or get a cash advance. Rewards cards give you cashback, travel points, and other benefits based on your spending. Secured credit cards need you to deposit some cash as collateral. Charge cards don’t have a credit limit but don’t allow unpaid balances to be carried over from month to month.
Credit cards allow you to build credit history as their use reflects in your credit report. Timely payments and utilizing only a small percentage of your credit limit can help you raise your score. You may also get additional warranties and insurance for purchases for certain things purchased with your credit card. You may also get price protection. Credit cards also have greater fraud protection than debit cards. As long as you report loss or theft within 48 hours, your maximum liability will be $50. Some credit cards also offer rental car insurance.
Debit cards: There are standard debit cards that withdraw money from your checking account. Then there are Electronic Benefits Transfer (EBT) cards issued by state and federal agencies to let you use their benefits for purchases. And there are prepaid debit cards that let you spend only the amount pre-loaded on that card.
Debit cards let you only use the money you already have. You can’t rack up debt with a debit card like you can with a credit card. Debit cards issued by Visa or MasterCard also have fraud protection similar to that offered by credit cards. The key is to inform the bank within 48 hours of any fraudulent activity. Debit cards also don’t have annual fees like most credit cards.