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When to Use a Credit Card vs. Debit Card

Both credit cards and debit cards offer flexible convenient spending, but the pros of using a credit card trumps debit cards in most situations.

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When it comes to spending, credit cards and debit cards are the easiest options. On the surface, they function the same. You swipe, dip, or tap your card for in person purchases or enter your card information on online purchases. Behind the scenes, the two cards couldn't be more different.

Debit cards are essentially an extension of your checking account, allowing you to easily make purchases without having to write a check or make a bank withdrawal. Credit card purchases add to a credit card balance that a credit card issuer has given you permission to use. If you're carrying both types of cards, you may wonder when you should use each type of card. Here's a quick guide to help you decide.

Use a Credit Card When:

You want to take advantage of a 0% introductory interest rate. These promotional offers give you a chance to pay off large purchases over time without incurring any interest cost. Otherwise, a monthly finance charge is charged each month you carry a balance. You always have the option of paying for your purchases in full to avoid paying any interest at all.

You're renting a car or booking a hotel. Many rental car companies and hotels require an authorization hold when you reserve a room. Depending on the business, the hold amount could be higher when you use a debit card. The downside is that a portion of your account balance is unavailable until it's released a few days after you've returned the rental or checked out.

You can earn credit card rewards on purchases with the right credit card. Very few banks pay rewards on debit card purchases. When they do, those rewards pale in comparison to what you can earn with a credit card. You have a huge opportunity to build up your rewards balance if you use the right credit card for your everyday spending.

You want access to more perks. On top of rewards, a credit card comes with access to more benefits, depending on the card you choose. For instance, many credit cards offer collision damage waiver on rental cars, purchase protection, and extended warranty, among others. Some credit cards go above and beyond, waiving baggage fees, covering your TSA PreCheck cost, or providing access to airport lounges.

You want better fraud protection. Debit cards do offer some fraud liability coverage, but you could be responsible for an unlimited amount of fraudulent charges depending on when you report them to your bank.

By comparison, many credit cards offer zero fraud liability. With this benefit, you won't be responsible for any authorized charges made to your credit card. Even without zero fraud liability protection, your maximum liability for fraudulent credit charges would only be $50. Using your credit card is preferable in places that carry a higher risk of fraud.

Use a Debit Card When

You'd have to pay a surcharge to use your credit card. To cover credit card processing costs, more retailers are charging an extra fee—a surcharge—to shoppers who use their credit card. Unless you can offset the surcharge by earning credit card rewards, it makes more sense to use your debit card.

You have a high interest rate balance on your credit card. Adding more purchases to your balance will only increase the interest cost and the time it takes you to pay off your balance. Until you pay off your credit card balance in full, it's smarter to use your debit card for everyday purchases.

You need to withdraw cash from an ATM or get cash back on a transaction. Debit cards are almost always the better option for receiving cash. With your credit card, you won't earn any rewards on the cash advance, you'll be charged a cash advance fee, and the cash advance has a higher interest rate than purchases.

Some people prefer using a debit card because all purchases are instantly paid in full, eliminating the risk of getting into debt. However, debit card information is not reported to the credit bureaus and can't help you establish or build credit. Using a credit card, on the other hand, gives you a chance to establish and build your FICO® Scores overtime, which creditors and lenders use to approve your applications. No matter which you choose, spending responsibly is always most important.

LaToya Irby

LaToya Irby is a financial writer with over 14 years of experience. She's been quoted and published as a credit expert in several major publications including USA Today, U.S. News and World Report,, and The Chicago Tribune.