Spending Limit

• Charge cards and debit cards both have spending limits, but there are big differences in how these respective lines function. The spending limit for your debit card is equivalent to the amount of available funds that are in your checking account. As deposits come in, your spending limit goes up; as withdrawals come out, the purchasing power of your debit card declines.
  
  Charge cards carry a fixed spending limit for a specified time period, usually one monthly billing cycle. The spending line on your charge card fluctuates as you send in payments and make purchases, but the initial line is determined by your creditworthiness, not your bank account balance.
  
  

Payment Terms

• Charge cards provide you the flexibility to pay for your purchases at a later date, whereas a debit card requires immediate cash payment from your bank account. At the end of your monthly billing cycle, your charge card issuer will send you a statement of your account activity and purchases. The statement will include the current outstanding balance, the required payment and the due date of the payment.
  
  The due date is usually 15 to 20 days following the statement closing date. You should pay the full amount owed as indicated on your statement by that date, but until then, you can continue to make charges using your charge card, provided you have not exceeded your spending limit. A debit card differs greatly. You may receive a monthly statement, but as soon as you use your debit card to make a purchase, the cash is automatically deducted from your bank account.
  
  

Worldwide Acceptance and Branding

• Nearly all debit cards carry the Visa or MasterCard logo and can be used at any location or ATM where these cards are accepted. Some merchants may not be set up for debit card processing, even though they accept Visa or MasterCard credit card sales. American Express is the leader in offering charge cards, and you will find they are widely accepted at many places. However, some merchants do not accept American Express due to higher transaction fees. Some charge cards do not carry any of these brands and are issued by department stores or other retailers. These particular cards are accepted only at that specific merchant.
  
  

ATM and Cash Access

• Most branded debit or charge cards --- Visa, MasterCard, American Express --- can be used at ATMs to withdraw cash. With a debit card, you may be allowed to withdraw up to the entire amount available in your checking account in cash from an ATM without interest charges or transaction fees. There may be some restrictions, such as daily transaction limits imposed by the debit card's issuing bank.
  
  You can also withdraw cash from an ATM with a charge card, but often the amount you can withdraw is limited to a portion of your overall available spending limit, and any withdrawal can quickly reduce your general purchasing ability. With charge cards you may find yourself paying additional transaction fees --- typically a percentage of the overall amount withdrawn --- as well as high interest rates on cash withdrawals. The interest may start accruing the moment you take cash from the ATM.
  
  

Credit Bureau Reporting

• Charge cards, whether it's a branded or department store card, reflect on your credit report and help you build credit history. Debit cards, however, never show up on a credit report and do not help with improving your credit score. Late payments or going over the limit on your charge card account will reflect negatively on your credit report, but getting hit with an overdraft fee when you use your debit card will not affect your credit score.
  
  

Fees and Interest Rates

• Debit cards and charge cards both have fee structures. The most common fee assessed on debit cards are ATM withdrawal fees and over-the-limit fees. Charge cards have similar fees, but also have late fees and penalty fees if the balance is not paid in full. With debit cards, late fees or interest fees are not a problem since the account can never have a late status. With charge cards, the late fees or penalty fees for not paying off the entire balance can be hefty and are usually expressed as a percentage of your outstanding balance.