When Should I Use a Credit Card vs. Debit Card?

When Should I Use a Credit Card vs. Debit Card?

September 5, 2019         Written By Lynn Oldshue

While credit cards and debit cards look identical, there are several major differences. Most obvious, debit cards are linked to your checking account while credit cards give you access to a line of credit offered by the issuer. In other words, debit cards give you access to your own funds while using a credit card to pay is taking out an instant loan.

Since it’s usually better to use your own money instead of taking out a high-interest loan, it would seem logical that one should always use their debit card and only use their credit card for emergencies. However, this is not the case. For a number of reasons, it is more beneficial to use your credit card—as long as you can pay your balance in full and on time each month.

Credit Cards Help Build a Credit History

One of the reasons to use a credit card is to help build a credit history. If you hope to one day purchase a car or a home, you will need to have a solid credit score to qualify for a loan and get the best interest rate. Debit card usage is not reported to the three major credit bureaus, so using a debit card will do little to help your credit score. However, if you use your credit card responsibly by paying at least the minimum payment each month and keeping your credit utilization under 30%, credit cards will help build a positive credit history.

Fraud Protection

In addition to helping you build credit, credit cards do a better job of protecting you against fraud. If a thief somehow obtains your credit card details and uses them to make fraudulent purchases, the card issuer will refund the money to your account as soon as you report the unauthorized activity; then they will close your current account and issue you a new card.

While your bank will usually not hold you liable for fraudulent purchases on your debit card, the process is much slower. Let’s say someone fraudulently uses your debit card to spend $1,000. You report the activity, and your bank blocks that debit card number and sends you a new card. However, before they reverse the transaction, they will launch an investigation, which can take several days. That means you will be without your $1,000 as they investigate, which could obviously make it difficult for you to pay your other bills.


The final reason to opt for credit cards over debit cards is that you will be rewarded for your use. Credit card rewards can be anything from airline miles to cash back. Not only will you earn a set number of miles, points or cash back for each dollar you spend, many cards offer increased rewards when you spend a certain amount within the first few months of opening your account. For example, the Capital One® Quicksilver® Cash Rewards Credit Card offers new cardholders a $150 cash back bonus when they spend $500 within the first three months of opening their account. This is in addition to the usual 1.5% cash back per dollar spent.

Is There a Time to Use Your Debit Card?

There is no need to cancel your debit card! While credit cards are a great, secure way to get rewarded for your spending, you should use them with caution. If you cannot pay off your balance in full and on time each month, you will soon be spending more in interest than you will be earning in rewards. Thus, if you are someone who struggles to control your spending, you may be better off using your debit card and saving your credit card for emergencies.

The information contained within this article was accurate as of September 5, 2019. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


About Lynn Oldshue

Lynn Oldshue has written personal finance stories for LowCards.com for twelve years. She majored in public relations at Mississippi State University.
View all posts by Lynn Oldshue
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