What distinguishes a credit card from a debit card?

The distinction between a credit card and a debit card primarily lies in the source of funds utilized during a transaction. A credit card allows users to spend based on borrowed funds, meaning that when a purchase is made with a credit card, the money comes from a line of credit extended by the credit card issuer. This allows individuals to make purchases without immediately withdrawing the funds from their bank account. Cardholders are required to pay back this borrowed amount, typically on a monthly billing cycle, and they may incur interest if the balance is not paid in full.

In contrast, a debit card draws directly from the user’s bank account, meaning that the funds being spent are the account holder's own. This fundamental difference in how payments are processed is what sets credit cards apart from debit cards. Understanding this distinction is key for consumers in managing their finances and making informed decisions regarding their payment options.

The other options, while pertaining to payment methods, do not accurately capture the primary distinction that credit cards are based on borrowed funds rather than on available bank account balances.