Should I use a Debit or Credit Card?

The convenience of plastic, whether in the form of debit or credit cards, is hard to beat.

They both offer advantages, yet have significantly different features and uses. Here is what to consider when deciding if you should make a purchase using a credit card or debit card.

Advantages of Credit Cards

Credit cards offer many advantages to you as a consumer. Although cards may have different sets of terms and conditions, those advantages may include:

1. Building up your credit score, which increases your chances of qualifying for other loans, such as a mortgage.
2. Ability to borrow funds to make purchases if you do not have the money available to pay the entire amount.
3. Taking advantage of card incentives, like the ability to accumulate reward points, airline miles, or receive cash back when making purchases.
4. Receiving the card’s additional warranty coverage on merchandise.
5. Getting insurance waiver coverage for car rentals, which could otherwise be costly if insurance is purchased through the rental agency.
6. Reduced liability for lost or stolen cards, provided that you report the event to the card issuer promptly.
7. Ability to dispute credit card purchases for damaged, stolen or lost goods during shipping.

Advantages of Debit Cards

Similarly, debit cards also offer distinct advantages, which may include:

1. No annual fees associated with a debit card.
2. Reducing the chance that you may fall into debt, since purchases come out of your account immediately.
3. Avoiding interest charges.
4. Setting up automatic transfers between accounts.
5. Withdrawing cash from an ATM or with some retailers at the point-of-sale.

Like credit cards, terms and conditions may be different between debit cards, so it is crucial that you understand which of these advantages apply to your specific card and which do not.

There’s no “best” card for everyone. Instead, the best card type depends on your unique financial situation, past credit history, comfort with incurring debt, projected use for the card, and what, if anything, you’d like in return for using it.