5 Key Differences of Debit and Credit Cards

At their core, the “basics” are the foundation for understanding a concept. Learning some of the basic characteristics of debit or credit cards will help you understand how to use and manage them wisely – and, how they differ. Use the guide below to accomplish this. The next time you go to make a purchase, you’ll have the foundation of knowledge needed to make an informed decision on which card to pull. 

Did you know? General Electric Credit Union (GECU) members have access to a network of over 100,000 free ATMs!¹ Plus, ITMs at most GECU locations.  

How debit and credit cards differ 

1. Source of funds

The money available on your debit card is tied to a checking account. When you withdraw funds, it’s directly from the account you deposited money into. Credit cards, on the other hand, allow you to borrow funds up to a set credit limit. The credit limit offered to you by a financial institution is based on several factors, such as your income, credit score, and payment history.  

If you want to use the funds tied to your debit card you can use the card itself or go to an ATM or Interactive Teller Machine (ITM) to withdraw cash. You do not have the option to withdraw cash from a credit card. 

Not familiar with ITMs? That’s OK! The technology is easy to understand and there to fast-track your banking needs. ITMs take the basic functions of an ATM and combine them with even more features. You still have the option to withdraw cash, but also make a loan payment, cash a check, and much more! You have the flexibility to bank your way, too. While ITMs are self-service, there are assisted options you can select when you need a little extra help. Or, when you just want to see a friendly face! 

2. Credit Score Impact

Using a debit card does not help or hurt your credit score because the funds are not borrowed. But that doesn’t mean you shouldn’t be mindful of your checking account balance. It’s important to know what’s coming in, what’s going out, and what your balance is to avoid overdrafts.

A credit card, though, allows you to build credit history and display good credit habits – improving your credit score in turn. Always pay the balance in full instead of carrying it over to the next cycle. The latter will result in interest charges based on a percentage of your balance due. Over time, this habit will allow debt to snowball out of control.  

Tip: Get your copy of The Ultimate Beginner’s Guide to Credit Scores, a free, downloadable eBook, to learn more about improving your credit score.

3. Documents and billing

A credit card balance is what you owe on the card. Your financial institution will send you a billing statement explaining your balance, if any, from the previous billing cycle, the minimum payment due, a due date, and any fees associated with late payments. It’s wise to pay the balance in full each billing cycle to avoid accruing interest. 

You do not have to make payments on a debit card because you did not borrow the funds. As a result, you’ll just receive a statement or eStatement detailing your transaction history over the period. 

GECU debit and credit cards come with a wealth of unique perks and features. From Money Management and eStatements to Debit Card Controls, you’ll find something to love about our checking accounts. And for credit cards, Credit Union members have access to industry-leading rates, introductory offers, and bonus opportunities.Plus, both debit and credit cardholders can enjoy contactless payment options like Apple Pay®, Google Pay®, and Samsung Pay^TM. Contact us or schedule an in-branch appointment online to discuss your options today. One of our dedicated team members will walk you through the features of each account to find the perfect fit for you.