What is the difference between credit cards and debit cards?

One key difference between credit cards and debit cards is where the money you spend comes from. Debit cards draw money from your checking account, while credit cards borrows the money from a credit card company that acts as a lender and you pay over time. That’s why credit cards charge interest while debit cards don’t.

What is the difference between a credit card and a charge card?

Another key difference: Credit cards have preset spending limits while charge cards do not. Both usually charge for late payments. Credit cards and charge cards both typically report both positive and negative information to credit reporting agencies. That means they can provide valuable credit references as long as you pay your balances on time.

Why do credit cards charge more interest than debit cards?

That’s why credit cards charge interest while debit cards don’t. Credit cards also usually offer more lucrative rewards programs than debit cards, but their high annual fees can cost more than a debit card year-over-year.

How does a debit card work?

A debit card is linked to your checking or savings account. Each time you use the card, money is automatically taken from your checking or savings account to cover the purchase. You can't get into debt trouble with a debit card, since it does not allow you to spend more money than you have in your account.