{"id":14674,"date":"2024-11-01T15:43:44","date_gmt":"2024-11-01T21:43:44","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=14674"},"modified":"2025-06-04T16:25:27","modified_gmt":"2025-06-04T22:25:27","slug":"difference-between-credit-and-debit","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-cards\/difference-between-credit-and-debit.html","title":{"rendered":"What is the difference between credit and debit cards?"},"content":{"rendered":"\n
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The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n

Debit cards use money from your checking account and have no monthly payment or impact on your credit score. Credit cards use money from a credit card issuer that must be paid back monthly and will impact your credit score.<\/p>\n\n\n\n

On the surface, debit and credit cards are identical. Both have 16-digit card numbers, expiration dates and magnetic stripes. Both are convenient ways to make purchases online and in stores. But beyond these similarities, debit and credit cards are two very different things.\u00a0<\/p>\n\n\n\n

Understanding the difference between debit and credit is an important part of financial decision-making. With this knowledge, you\u2019ll be well equipped to make the right choices for your spending needs. Here\u2019s a quick guide to the differences between debit and credit. <\/p>\n\n\n\n

<\/a>What is a debit card? <\/h2>\n\n\n\n

A debit card is a type of payment card that\u2019s linked to your checking account. When you make a purchase, money is deducted from the account in real time. Debit cards are a convenient way to make use of money from your checking account without having to carry cash. <\/p>\n\n\n\n

Most debit cards come with low or no fees, but this depends on your bank\u2019s policy. Occasionally, banks will charge a fee if the card is used infrequently, if the checking account is below the minimum balance or if your account has overdraft protection<\/a>. <\/p>\n\n\n\n

Debit cards also come with varying degrees of fraud protection. If your card is lost or stolen, most banks will cancel your card as soon as they\u2019re notified. If money is stolen from your account, making a claim will prompt your bank to investigate the matter, but this process can be lengthy. <\/p>\n\n\n\n

<\/a>How to get a debit card <\/h2>\n\n\n\n

Debit cards are distributed directly through your bank. To obtain one, you\u2019ll first need to sign up for a checking account. This usually requires you to share some personal information with the bank and deposit an initial balance. <\/p>\n\n\n\n

After setting up your checking account, your debit card should arrive in the mail. Once you\u2019ve activated it, you can use it to make purchases in stores and online. <\/p>\n\n\n\n

<\/a>Debit card pros and cons <\/h2>\n\n\n\n

Debit cards are appealing to users in many ways\u2014above all, their practicality. They don\u2019t come with high interest rates or annual membership fees. And because they use the funds already stored in your checking account, there\u2019s no need to open a line of credit. Plus, there\u2019s the added benefit of accessing the funds in your account without withdrawing cash from an ATM. <\/p>\n\n\n\n

However, relying on your own checking account can also be a hindrance. If you need to make a purchase but don\u2019t have the funds ready and waiting, you may not be able to complete the transaction. And while many debit cards are equipped with some form of fraud protection, it\u2019s typically your responsibility to alert the bank of any suspicious activity. Otherwise, you may have trouble restoring stolen funds. <\/p>\n\n\n\n

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<\/a>What is a credit card?<\/h2>\n\n\n\n

A credit card is another form of payment card issued by a financial institution, most often a bank. It gives the user access to a line of credit they can borrow from. As a cardholder, you agree to pay the borrowed funds back plus interest, but the exact terms will vary according to the bank\u2019s terms. <\/p>\n\n\n\n

Credit cards often come with fees attached, both to ensure the institution profits from the deal and to charge the borrower for the card\u2019s benefits. These fees are measured through your annual percentage rate (APR)<\/a>, which clarifies the price you pay each year to borrow money. <\/p>\n\n\n\n

To illustrate this, let\u2019s say you have an APR of 17.99 percent and an outstanding balance of $500. APR is calculated using a daily periodic rate, which can be found by dividing the rate by 365\u2014in this case, 0.00049. Multiplying this number by your current balance brings your daily periodic rate to $0.25, which can add up to quite a bit if you consistently have an outstanding balance. <\/p>\n\n\n\n

Credit cards also come with built-in card protection. Unusual activity may cause your card to freeze until you manually approve the transactions, a useful safety net against theft. As with debit cards, it\u2019s up to you to alert the company if unfamiliar activity appears on your account. <\/p>\n\n\n\n

<\/a>How to get a credit card <\/h2>\n\n\n\n

Credit cards aren\u2019t attached to your checking account and must be applied for. When you apply for a credit card,<\/a> you\u2019ll be asked to provide some personal information, along with details about your income and credit history. Lenders use this info to predict what kind of borrower you\u2019ll be and assess the risk they\u2019ll assume by lending to you. <\/p>\n\n\n\n

A variety of factors will influence your chances of being approved for a credit card. These include: <\/p>\n\n\n\n