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Debit vs Credit: When to Choose?

Posted by: LBS Financial on April 25, 2023

When it comes to paying for things, deciding whether to use your debit card or credit card can sometimes be complicated. Both methods have their advantages depending on the circumstance. Here’s an overview of each card and our recommendations on when to use them.

When to Use Your Debit Card

Debit cards allow you to make purchases by using the funds you have in your financial institution. The funds will be taken directly out of your checking account or available account balance in real time or near real time, depending on whether you use your PIN or signature. A great advantage to debit cards is that there is little to no fees and no interest charges compared to a credit card. This is especially great when you need to withdraw cash from the ATM – just make sure that ATM is within your network. Paying with your debit card can also help control your spending. With a debit card you are managing your own money which can help you live within your means, when managed properly.

When to Use Your Credit Card

Credit cards allow you to make purchases by borrowing funds from your financial institution or credit card company. Credit cards can help you build credit history, and typically offer great fraud protection and rewards. This can be great for shopping online, so you don’t have to input your debit card information online and risk it being exposed, for travel purchases, or for emergency situations when you need funds right away. Understand that it is okay to use a credit card for everyday purchases such as groceries, traveling, and entertainment, as long as you are being responsible and paying off the balance in full each month. Remember it is your financial institution’s money, and you’ll have to pay it back eventually, with interest if you do not pay the balance in full each month. The biggest drawback of credit cards is overspending and going into credit card debt, which can negatively impact your credit score and cost you more money in the long run.

Credit cards that offer cash back rewards and other perks can help you earn a return on your money. However, if you plan to use your credit card as your primary card, it’s really critical to monitor and track spending throughout the month so you are still able to pay the full balance. Otherwise, if you are paying interest on your balances just to earn points, it is most likely a losing proposition.

At the end of the day, there is no wrong answer whether you use your debit card or credit card. Both cards, when powered by Visa or Mastercard, offer fraud protections. Having both as an option is essential, and what is most important is responsible use for both methods.

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