How does a debit card differ from a credit card?

A debit card allows you to access funds directly from your checking account, meaning any purchase or withdrawal is deducted from your available balance. This feature essentially links your spending directly to the money you have in your bank account, eliminating the potential for debt since you cannot spend more than what you currently have.

In contrast, a credit card operates on borrowed funds up to a predetermined limit set by the credit issuer. When you make a purchase using a credit card, you're not limited to your current account balance—you're borrowing money with the expectation that you will repay it later, usually with the option to pay over time, potentially accruing interest if the balance is not paid in full by the due date.

Understanding this distinction is fundamental in personal finance, as it affects budgeting, spending habits, and managing debt. Debit cards can help maintain a strict budget, while credit cards can offer short-term funding with the responsibility of repayment, impacting your overall financial health differently.