What is the main difference between a credit card and a debit card?

What is the main difference between a credit card and a debit card?

• A. Credit cards charge to an account paid later; debit cards withdraw from a demand deposit account.
• B. Credit cards require a PIN; debit cards do not.
• C. Debit cards can only be used online; credit cards can be used offline.
• D. Credit cards are linked to savings accounts; debit cards are linked to checking accounts.

Answer: (A)

The main difference between a credit card and a debit card is accurately captured in the first choice. A credit card allows consumers to borrow funds from the issuing bank up to a certain limit, with the expectation that the amount borrowed will be paid back later, typically with interest if not paid off within a grace period. This means you are spending money that you do not currently possess, thereby creating a debt obligation. On the other hand, a debit card is directly linked to a demand deposit account, commonly a checking account. When a debit card transaction is made, the funds are withdrawn immediately from the account, meaning the cardholder can only spend the amount they have available in their account. This fundamental difference shapes how each card functions and influences consumer behavior regarding spending and budgeting. The other options describe aspects that do not accurately reflect the core differences between credit and debit cards. For instance, while credit cards often use security features, the requirement for a PIN is not universally true for all credit cards, as many do not require a PIN for transactions. Additionally, debit cards can be used both online and offline, while credit cards are widely accepted in both contexts as well. Lastly, although debit cards are primarily linked to checking accounts, credit cards are not tied to any

The main difference between a credit card and a debit card is accurately captured in the first choice. A credit card allows consumers to borrow funds from the issuing bank up to a certain limit, with the expectation that the amount borrowed will be paid back later, typically with interest if not paid off within a grace period. This means you are spending money that you do not currently possess, thereby creating a debt obligation.

On the other hand, a debit card is directly linked to a demand deposit account, commonly a checking account. When a debit card transaction is made, the funds are withdrawn immediately from the account, meaning the cardholder can only spend the amount they have available in their account. This fundamental difference shapes how each card functions and influences consumer behavior regarding spending and budgeting.

The other options describe aspects that do not accurately reflect the core differences between credit and debit cards. For instance, while credit cards often use security features, the requirement for a PIN is not universally true for all credit cards, as many do not require a PIN for transactions. Additionally, debit cards can be used both online and offline, while credit cards are widely accepted in both contexts as well. Lastly, although debit cards are primarily linked to checking accounts, credit cards are not tied to any