Buy and Borrow

Credit Card or Debit Card: When to Use Each

Erin Palmer

May 28, 2018

Deciding to use debit or credit

Cash-filled wallets aren’t as common as they used to be thanks to credit and debit cards. Most people prefer to pay with a card, for everything from daily transactions to major purchases.

But how much thought do you give to whether to use a credit or debit card? It might not seem like a big difference, but each card has its own benefits.

Here are some easy pointers on when to use a credit card and when to use a debit card:

An image of a wallet with two cards peeking out

When to Use a Credit Card

Credit cards can offer perks, convenience and safety, which is why they’re a popular choice for many consumers. For certain transactions, credit cards might offer advantages that debit cards can’t quite match.

Some reasons you may choose to use credit over debit include:

  • Traveling. Many airlines, hotels and travel-related companies require a credit card for reservations. If you use a debit card, they may put an inconvenient hold on your card. Credit cards also allow you to stop fraudulent charges if your card is compromised while you’re away.
  • Renting a car. Not only are credit cards preferred (and sometimes required) to reserve a rental car, but they also may include additional benefits like rental insurance.
  • Making online purchases. Since many credit cards offer zero liability, you don’t have to worry about being liable for purchases you didn’t authorize.
  • Shopping for electronics or appliances. A lot of credit cards offer additional warranties on large purchases like electronics and appliances. This coverage can supplement the manufacturers’ warranties.
  • Earning rewards. If your credit card offers rewards, it could be worth using it to help earn more points or perks. Though some debit cards do offer rewards, credit cards may earn you more points per purchase.
  • Building or rebuilding your credit. If you are establishing credit for the first time or are working to rebuild your credit, using a credit card responsibly can help.

Keep in mind that some credit cards do have associated fees. And since credit cards charge interest, it’s important to make sure that you pay attention to your credit card balances and not get in the habit of buying what you can’t afford.

When to Use a Debit Card

Debit card purchases are associated with a specific account. This makes it easy to keep track of your purchases through your financial institution, especially if you use online banking or a mobile app. Debit transactions also may have fewer associated fees, especially if you have a free checking account without fees.

Some reasons you may use a debit card for purchases include:

  • Keeping to a budget. If you are on a budget and trying to save money, using a debit card can help you bypass paying interest on purchases.
  • Avoiding fees. Some places charge fees for using a credit card, like certain ATMs or bill pay system. In these cases, you may avoid the fee by using your debit card instead.
  • Getting out of credit card debt. If you are in credit card debt, you may want to pay down your debt instead of incurring new charges. A debit card can cover you during this time.

Whether you use credit or debit, always practice smart money management. Good financial habits start with you!

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