Hi, used to work in a credit union.
The comments on this post are wild. So, I figured I’d weigh in and explain some things real quick and clarify what some other commenters have already said. For quick clarification, I live in the states and worked in a credit union in the states. Your locale may have different laws and regulations that govern your financial institutions and card underwriters. All information that follows is based on my knowledge from issuing debit and credit cards and explaining them to people in the US. So, you may have to clarify with your financial institutions what governs your cards.
So first off, what is a credit card? A credit card is a revolving line of credit. That is to say, it is a loan that you agree to certain terms (interests rates and fees) and the underwriter (the financial institution that issues your card) will perpetually extend a predetermined amount of money (your credit limit) for as long as you maintain your account and abide by their terms. Quick note, your underwriter can decrease your limit if you do not abide by their terms and can raise your limit for being a good customer and earning trust with that company. (Again, I live in the US, your mileage may vary etc) You can also ask the card company to increase your limit.
As is explained in the comments, stores and merchants are charged a fee by the card underwriters and the point of sale (POS) systems they use. In reality what happens is the card companies charge the POS company and they charge the person who has the POS in their store. Most card companies offer a cash reward/rebate program to their customers to get you to use the card more places. So let’s say Visa charged 3% of your purchase price to Verifone who charged Walmart 5% for card processing. Visa will offer their customers 1% of that fee they’re collecting from Verifone back to the customer for using their Visa card. This is cash back as a rewards program. As a rule, credit cards are the only cards that offer rewards programs, but their are a few institutions who extend those rewards to their debit cards.
A debit card exist in some weird hybrid space of being an ATM card and a credit card. Your debit card is issued directly from a banking institution (this is the technical term for any institution that offers banking services including Credit Unions) and is not underwritten like a loan but is a direct line to your bank account. This direct connection to your bank account is the main reason it is highly recommended never to use your debit card online: if you put your card information in online and that information is stolen, the thief has a direct line to all the money you have in your account as opposed to a made up number that your credit card issuer says you can utilize as long as you agree to pay it back. Most debit cards can be run as credit as well. Yes, you will more than likely (each institution is different) not be charged interest, but the transaction will, typically, be processed slower than a debit transaction. It will also, typically, put a hold on the transaction amount in your account.
Now, you can use your debit card at an ATM (also referred to as a cash point) to directly pull cash out of your bank account. And because your debit card is a direct line to your bank account, many stores will allow you to increase your transaction amount and take the amount above your purchase price back as cash. This is a cash back service. It is in no way related to the cash back program of a credit card. It is the same difference of making a $20 purchase and paying with a $50. The cashier will give you $30 in cash back as change. It is cash, that you get back.
The confusion happens because education around financial products is lacking for most people, and credit cards use their cash reward programs as a major selling feature. So we see cash back rewards programs advertised and if you are new to cashless purchases the connection of getting cash back is immediately tied to the rewards programs that are heavily advertised by the credit card companies.
The main difference is, the cash you are taking out of the POS at the store is the money from your bank account. The cash reward at the credit card company is the card company giving you a portion of the fee they collected from your purchase to you as an incentive to use your card.
Now let’s make this more confusing. You can draw cash out of your credit card. DO NOT DO THIS OPTION! Your credit card offers a service know as a cash advance. They will have, typically, part of your credit limit that they will allow you to draw out of your card as cash using a cash advance service. This is a terrible service they offer. Why? They charge a higher interest rate. On average, in the US, this interest rate is around 30%. So don’t use it.
Instead, if you you need cash and you don’t have enough in the bank, you can go to your bank and look at taking a signature loan or opening credit line. A signature loan is a loan with no collateral. Collateral is like a house or car, a physical thing the bank can take if you fail to pay. With a signature loan, you promise to pay the loan back in a specified amount of time and if you don’t the bank can seek other recourse to reclaim the funds they lent you. Main one they do is take the money as it comes into your account until your loan and subsequent accrued interest and fees are paid back.
You can also open a credit line. A credit line is exactly like a credit card but without the card. Typically. The credit line is attached to your account and is a revolving line of credit that you can borrow against and repay for as long as the account is open. You can only access it through your account, meaning, you can often take cash out of it at an ATM, move funds from it to your checking account via online banking, in person at your financial institution, or by doing a transaction over the phone with your institution if they offer that service.
And there you have it. Hopefully that clarifies this whole debacle, which started as a “hey I was young and no one explained this to me and I learned something through experience so learn from my experience” post to being the great semantics off of ‘26.
Debit card is a cash or cheque (also spelled ‘check’) alternative.
Credit cards offer “cash” back programs to get you to use their card. That cash is given to you from them doing business.
Debit cards can draw cash out of your account for you to do cash transactions. They can do this at certain stores via their POS system, just like getting change out of a larger bill that is larger than your purchase amount.
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