Would you trust your teen with a credit card? Six million US parents do. This statistic showcases that the youth is becoming increasingly comfortable with money, credit cards, and technology.

What about debit cards though? If you asked them, “do you know the difference between debit cards vs credit cards?” how would they respond?

For the rest of us, it’s important to know the difference so you can better manage your money. If you’re unsure, then this guide is for you. Keep reading to get the full scope of the picture.

Debit Cards vs Credit Cards

When comparing debit cards vs credit cards, it’s easy to get confused. They’re often accepted at the same establishments and offer convenience over handling cash. Debit cards and credit cards look and feel the same too.

So what is the main difference then? It’s where the card pulls the money from when making a purchase.

What Is a Debit Card?

Debit cards pull money from your checking account.

A hold is placed on your debit card at the time of purchase. The merchant will then send the transaction to their bank. This transfer to the merchant’s account can take a few days to process.

Overspending will be less of an issue with debit cards too. You can only spend what you have in your checking account. Many online banks will provide a buffer, notification, or pay me feature to ensure overspending doesn’t occur.

Debit cards offer a great solution to managing your money within your means. You won’t have to deal with interest, fees, or borrowing money either.

Debit cards vs credit cards shouldn’t be a difficult thing to comprehend.

What Is a Credit Card?

Credit cards pull money from your credit line.

Use your credit to make basic transactions. The issuer then pays the merchant. You then pay the issuer once you receive the bill.

Keep in mind that if you have a balance from month to month, you’ll be charged interest.

When you use credit cards, you might spend beyond your means. Let’s say your credit limit is $1,000. That doesn’t necessarily mean the item(s) will fit in your monthly budget.

Credit cards are great for emergencies as they’ll provide you extra time to pay off the card. There are also specific cards for specific needs. For instance, you could choose a travel card if you fly a lot for work or pleasure.

Debit or Credit?

Now when the cashier asks you “debit or credit?” you’ll know what to do. You won’t have the battle of debit cards vs credit cards in your mind.

Debit will be best for daily spending while credit may be best for larger priced items or a big trip.

Whatever the case may be, it’s important to be fiscally responsible. As your practice your money management habits, you’ll improve over time. Don’t be afraid to reward yourself now and again too.

Finances can be confusing, right? Do not fret. Be sure to read more how-tos and guides right here on our blog.