It’s a common occurrence: you’re at the register, and suddenly you’re wondering whether you should use credit or debit. You may consider sliding out the credit card so you can get rewards. And besides, you want to conserve your cash.
On the other hand, perhaps you intentionally use your cards sparingly, mostly to avoid the interest you’ll occur if you can’t clear the debt right away. So you tend to default to your debit card. Still, you must use your card some time — if you expect to keep it.
What to do?
There is a myriad of reasons why one would choose one form of payment over the other, depending on the situation. But have you ever seriously wondered which payment method is best? Check out debt card versus credit card: which is better?
Just What is a Credit Card?
Let’s explain terms. A credit card is a financial tool that banks offer as a kind of loan. It has a line of revolving credit that you can use to pay for goods or services.
Just as with a traditional bank loan, you’ll have a credit limit and will incur interest – and maybe mounting debt — if your balance isn’t erased monthly. But if you’re smart about using it, your card can be a robust tool that can use to build real credit toward goals such home ownership. And as we say, some credit cards also offer rewards.
Just What is a Debit Card?
It’s a payment tool that’s equivalent to cash. When you buy or pay for something using a debit card, the amount is “debited” from an associated bank account. Whenever you use your debit card – deduct from it – you’re spending money deposited into that linked account.
What’s the Difference Between the Two?
Whenever you use a credit card, you are borrowing cash that a financial institution has allowed you to access. The bank covers the debt to the vendor, and you subsequently repay the bank. After all, when you signed off on your card, you agreed to repay any funds borrowed, plus interest.
Debit cards issued by your bank or other financial institution withdraw money directly from your bank account. Many people like them because of their convenience: they generally make carrying cash (or checks) unnecessary, especially since they are accepted globally. But if you do want some greenbacks in your wallet, you can also usually use a debit card to get cash from an ATM.
Which One Come Out on Top?
One major difference between the two concerns security. While both cards have measures in place that help protect against fraud, credit card issuers generally won’t hold you liable for fraudulent charges up to a certain amount. With debit cards, there are varying levels of responsibility, largely depending upon how fast a stolen or lost card is reported. Credit cards generally win in the security category.
Also, credit cards permit you to purchase something now and shell out for it later. That’s a tremendous benefit – if your spending is under control. Otherwise, all that financial freedom debt could ultimately lead to enrollment in a debt relief program. So, it’s imperative that your plastic is used wisely. As a rule, you should only use as much as you can pay off each month.
Further, credit cards offer more protection than debit cards on purchases, which is important if what you bought is damaged before it gets to you. Also, as we’ve mentioned, credit cards can be used to build your credit and garner favorable interest rates on personal or auto loans, for example.
When it comes to credit cards versus debit cards, credit cards have the edge but with one major caveat: the buy-now-pay-later feature can get you in trouble before you know it, so you must be very careful. If you’re already in serious debt, we recommend Freedom Debt Relief to help get you out of it.