What differentiates debit from credit?

The distinction between debit and credit primarily lies in how funds are accessed and utilized. When you use a debit transaction, you are directly spending money that is already available in your bank account. This means that funds are deducted instantly from your account balance, ensuring you are only using what you have without incurring any debt.

In contrast, the other options present scenarios that do not accurately describe debit transactions. For instance, purchasing on credit indicates borrowing, which applies to credit transactions rather than debit. Similarly, while credit may involve borrowing money from a lender, a debit transaction is not about borrowing but rather accessing your own funds. Lastly, debit transactions do not typically involve interest payments—interest is associated with borrowed money in the context of credit accounts or loans, not with prepaid funds. Thus, the correct understanding is that debit provides a straightforward use of existing funds, which is encapsulated in the choice that states debit is using money already in the account.