Despite their apparent similarities, credit cards and debit cards differ greatly from one another. Both measure 3.375 inches in width by 2.125 inches in height and usually feature a magnetic strip, an EMV chip, an expiration date, and a 16-digit card number. However, debit cards deduct money from your bank account, whereas credit cards let you borrow money. Continue reading to learn more about how the two sorts of cards differ from one another.

Key distinctions between debit and credit cards

When using a debit card, funds come directly from the bank associated with the card. On the other hand, when using a credit card, funds are borrowed from a line of credit issued by the card-issuing bank or credit union at a set interest rate. The card issuer sets the interest rate, and the user is billed monthly for the amount charged to their credit card, along with any interest charges and fees.

Credit cardholders can either pay off the entire balance by the due date or pay the minimum required payment amount. If only the minimum payment is made, any balance rolled over to the next billing cycle will be subject to interest charges. Repeatedly adding new charges to a credit card and only paying the minimum amount can lead to a cycle of high revolving debt, as interest charges can quickly inflate the overall balance, making it harder to pay off.

Cardless, a technology platform for brands to issue cobranded credit cards, advises consumers to manage credit responsibly to enjoy benefits like rewards and flexible financing options. However, it’s crucial to live within one’s means and consider using a debit card or other lending products with lower APRs if paying off a balance is difficult.

Pros of using a credit card

Using a credit card instead of a debit card has several fundamental advantages.

• Using credit cards sensibly can raise your credit score.
• the capacity to gradually finance a sizable acquisition.
• Extended warranties and purchase protections beyond those provided by retailers are available on certain credit cards.
• More secure against fraud than debit cards.
• the capacity to contest unapproved acquisitions.

Cons of using a credit card

Credit card borrowing involves borrowing money from a lending institution, which can be risky if not repaid promptly. Overcrowding can lead to debt as interest charges inflate the balance, making it harder to pay off. Regularly maxing out your credit limit or not making timely payments can negatively impact your credit score, as your account payment and balance activity are reported to credit bureaus.

To manage credit card spending and repayment, follow these four behaviors: pay your bill on time, avoid charging more than you can afford to pay off each month, and Make a plan for paying off your current debt before making any further purchases. Keep your balance well below your credit limit to avoid a negative impact on your credit score. Pay off what you charge every month to get an interest-free loan every month. Be aware of annual fees, late fees, over-limit fees, and punitive interest rates if you regularly pay late. Setting up automatic payments with your bank or credit card can also help ensure timely payments. Lastly, be aware of the potential for annual, late, over-limit, and punitive interest rates if you consistently pay late.