Credit vs. Debit: Is There a Difference in Cards?

These days, debit cards look exactly like credit cards with most even carrying the same logos on the card's face. Both types of cards can be swiped at the checkout and used to make purchases online or to make reservations at a hotel or airline. But is there a difference?
In a word: Yes!
A credit card differs from a debt card because when you use your credit card to make a purchase you are using the money of the company that issued the card, which is typically a bank, even though it may be for as little as 20 or 30 days ("the grace period"). In this scenario, you agree to pay the card issuer back the money you borrowed to make your purchase. Depending on your credit agreement, in addition to the money borrowed, you will also pay interest on the money borrowed at the rate you agreed to when you applied for their credit card, known as the annual percentage rate or "APR". Most credit cards allow a 20 to 30 day "grace period" in which no interest is charged.
When a debit card is used to make a purchase, it essentially works like using a check, as the account that is attached to your debit card is automatically debited when you use your debit card. The cost of your purchase is almost immediately deducted from the funds you have in this account; so, unlike a paper check, there is essentially no "float" time to the transaction. Problems also can occur when a debit card is used for a reservation because the money for the product or service is "blocked" from the account. When this happens, the money has not been actually taken from the account, but it is has been earmarked for the reservation.
For example, you may call a hotel to reserve a room for $100 to be used a month from now, and you provide your debit card for the reservation. Say, you have $500 in the checking account linked to this debit card, and you go to the electronics store the next day to buy a gizmo costing $401. You should have $99 in your account after this purchase, but your check will "bounce" because you only have $400 left available in your account -- not the $401 needed for the check -- even though the actual balance is still $500. See, although the hotel has not yet taken the money out of the account, it has blocked the $100 reservation charge from your account. This is a very common issue with using debit cards -- and one situation which creates a lot of phone calls to the customer service departments of banks, airlines, and hotels.
Another difference: While the two cards might act and look alike, the levels of consumer protection that each type of card provides can be different, such as in the case of a stolen and/or fraudulently used card. (Incidentally, many homeowner's or renter's insurance policies offer additional protection from fraud and identity theft, so you should check your policy or with your agent for more information about this coverage, if applicable.) So, you should check with your card issuer -- whether credit or debit -- to see how they handle fraud and lost/stolen cards.