All three cards allow you to make purchases without handling any cash, but each has its benefits and drawbacks.

A debit card is linked to your bank account and when you use it to buy something, the money is immediately taken out of that account. This is a good option if you want to make sure you’re only spending money you have, as the card will generally be declined if you don’t have enough money in your bank account to cover the purchase. But using a debit card won’t help you build your credit history.

A credit card is like a short-term loan. It is not linked to any bank accounts. Instead, the a credit card company covers the cost of your purchase today (up to a certain amount per month) with the understanding that you will pay them back later. You don’t have to pay it all back right away, but you do have to make a minimum payment every month. If you don’t pay in full, your remaining balance plus interest (called APR) will appear on next month’s bill. Using a credit card responsibly can be a great way to build a good credit history, but consistently missing payments or carrying a balance from month to month will do the opposite.

A charge card isn’t a loan and it isn’t linked to a bank account. This type of card covers the cost of your purchases today with the understanding that you will pay back what you owe at the end of every month. Unlike credit cards, charge cards do not have a pre-set spending limit.  If you do not pay off the full balance at the end of the month you will be hit with high fees or possibly a spending cap. Charge cards are good for people who want unlimited spending and can afford to pay off their balance each month. However, unlike credit cards, charge cards cannot help you build a good credit history.

Tags: charge cards, credit cards, debit cards