What is a debit card and how does it differ from a credit card?

• A. A debit card draws funds directly from the cardholder's bank account; a credit card borrows funds from the issuer to be paid back later, often with interest.
• B. A debit card charges interest on purchases; a credit card does not.
• C. A debit card is used only online; a credit card is used only in-person.
• D. A debit card is funded by the government; a credit card is funded by the merchant.

Answer: (A)

Debit and credit cards differ in how payments are funded and settled. A debit card uses funds from your bank account at the moment of purchase, so you’re spending your own money and there’s no separate debt to repay. A credit card, by contrast, lets you borrow money from the card issuer to pay for purchases, with the obligation to repay later. If you don’t pay the balance in full, interest accrues on the outstanding amount. This distinction explains why debit spending reduces your available cash right away, while credit spending creates a future liability that you may pay off over time.

Both types can be used for online or in-person purchases, and many offer benefits like rewards or security protections. It’s not accurate to say a debit card charges interest or that a credit card is always online-only, or to claim government funding or merchant funding underpins these cards.