Eli5 can someone explain debit and credit cards and why and when to use one or the other

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Eli5 can someone explain debit and credit cards and why and when to use one or the other

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Credit cards offer better fraud protection, and often other perks like insurance. Use a credit card whenever you can do so without being charged an extra fee (and pay it back in full by its due date)

Use your debit card when your credit card cannot be used without an extra fee.

It’s that simple.

Debit card is using your own money from your normal bank accounts

Credit card is using the banks money you need to pay back with interest

Use a debit card if you need to get cash from an ATM. Credit for everything else, but treat it as if it were a debit card (don’t live beyond your means).

Reason being a credit card offers you protections that a debit card doesn’t, and in many cases will also come with rewards points.

A Debit Card is tied directly to a bank account. When you make a payment with it, the money comes directly out of your bank account. If you don’t have enough money in the account, you might run into a negative balance (below $0) and be hit with fees. So, you have to watch your bank account balance, but as long as you’re keeping above a minimum amount you won’t have to worry too much about it. The big “advantage” of debit cards is that there’s no interest because you’re directly spending your own money.

A Credit Card is like an open loan. When you make a payment with it, the credit card company pays it and the money goes on your balance. If you pay the balance off in full then that’s it. If you don’t pay the balance off in full then interest grows and you end up owing more than you originally spent. And if you don’t pay the *minimum payment* then you can hurt your credit score. Oh, and having credit cards affects your credit scores (use them right and the score goes up, use them wrong and the score goes down). A big advantage to credit cards is they offer better protection against fraudulent activity. Also, many of them offer points that you can redeem for travel or gift cards or cash back. So you get rewarded for purchases you would have made otherwise. The big *disadvantage* to credit cards is that if you are not mindful and controlling of your own spending, you end up in debt and you end up spending more money on things than they should cost.

I pay my credit cards off 100% every week or two and can’t even remember the last time I used my debit card. Edit: I meant I haven’t used my debit card to make a purchase in a hella long time. As u/Vikkunen says, absolutely use it for withdrawing cash from an ATM (never use a credit card for this).

Debit cards let you spend money right from your checking account. You swipe your card and charges will subtract from your account automatically. Debit cards are helpful when you want to make a purchase immediately with money you already have without having to worry about a bill later.

Credit cards let you spend money based on access to a revolving loan from a bank. When you’re approved for a credit card, the bank gives you a credit limit, which is the most they’ll let you spend before you pay some of your loan back. When you swipe a credit card, the bank covers the cost of the purchase. Meanwhile, the purchase price is added to your credit card bill. Typically, you’ll have at least a month before you receive the bill for your purchase. If you pay all of your purchases on each bill in full each month, you can also typically avoid paying interest fees. Thus, credit cards allow you to buy now and pay later. In addition, credit cards entice users with extra perks that vary with each card, including rewards and purchase protection.