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Jacob Lund/Shutterstock September 20, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor. Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
At Bankrate, we have a mission to demystify the credit cards industry — regardless or where you are in your journey — and make it one you can navigate with confidence. Our team is full of a diverse range of experts from credit card pros to data analysts and, most importantly, people who shop for credit cards just like you. With this combination of expertise and perspectives, we keep close tabs on the credit card industry year-round to: Meet you wherever you are in your credit card journey to guide your information search and help you understand your options. Consistently provide up-to-date, reliable market information so you're well-equipped to make confident decisions. Reduce industry jargon so you get the clearest form of information possible, so you can make the right decision for you. At Bankrate, we focus on the points consumers care about most: rewards, welcome offers and bonuses, APR, and overall customer experience. Any issuers discussed on our site are vetted based on the value they provide to consumers at each of these levels. At each step of the way, we fact-check ourselves to prioritize accuracy so we can continue to be here for your every next. Bankrate logo Editorial integrity
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Credit cards allow you to make purchases now and pay them off later. Most credit cards offer , so you can either pay off your balance in full every month or carry a balance from month to month and pay it off over time. If you do not pay off your balance in full before your expires, interest may be charged on your unpaid balance. Credit cards come with a unique 16-digit number that lets you quickly and easily make purchases in person or online. As long as you haven’t exceeded your , your purchase should go through — which is why it can be easy for some people to spend more than they realize and end up in credit card debt. When you should use a credit card
Credit cards are a flexible tool that allow you to borrow money and pay it back later. But without the right habits and intentions, your will take a hit. Here are a few instances where it may make the most sense to use a credit card: When you re online shopping
Want to know how to ? Start by choosing reputable retailers like Amazon, Walmart and Target. Then, try to use credit cards for as many purchases as possible. Since credit cards offer that debit cards do not, meaning online purchases with credit come with fewer risks. So if you’re debating debit or credit for online shopping, pick credit for a safer shopping experience. Want to reduce your online shopping fraud risk even further? Add your credit cards to a . While storing your credit information on a digital wallet may sound like a fast track to getting hacked, virtual wallets actually make transactions safer. Today’s digital wallets use multiple forms of security to ensure that your credit card number remains hidden during every online shopping transaction. By creating a unique token every time you shop, for example, digital wallets make it very difficult for thieves to steal your credit card information. When you re at the gas pump
Gas station fuel pumps are among the riskiest places to pay since many gas stations haven’t yet implemented , and credit card skimmers can quickly swipe your information when you pay at the pump. It can be dangerous to use your debit card, which is tied directly to your bank account, over a credit card, especially when the card reader at the pump prompts you to swipe your card instead of inserting the EMV chip. Even though it’s safer to use credit cards at the gas pump, many people still use debit. But if you’re taking debit versus credit seriously, you might want to consider the security of credit over the ease of debit. If you want to work on your credit score
If you want to , you’ll need to use credit cards — and if you’re trying to establish good credit, you’re going to want to use those credit cards responsibly by and . A 750 or 800 credit score doesn’t happen overnight, but practicing good habits with your credit cards and showing discipline to potential lenders can lead to success with loan qualification and lower interest rates down the road. If you want to earn rewards
If you want to earn cash back, points or miles on everyday purchases — not to mention additional perks like — you’ll want a . Although a few debit cards offer cash back on purchases, you aren’t going to get as many rewards with debit as you will with credit. While the only offer 1 percent cash back, the offer at least 1.5 percent on general purchases and as much as 6 percent cash back on popular spending categories. How do debit cards work
Debit cards, like credit cards, come with a unique number that allows you to make purchases in person or online, quickly. The big difference between debit and credit is that debit cards withdraw money from a linked checking account. Instead of making a purchase now and paying it off later, a debit card immediately draws from your account to pay for the entire amount. As long as there’s enough money in your checking account, your debit card purchase should go through — and since you’re using the money you already have, you don’t have to worry about going into debt from the purchase. When you should use a debit card
Sometimes people hear “cash versus credit” and assume it means “credit cards versus paper money.” The truth is that debit cards are the same as cash. These days, “cash” refers to any money already in your possession, such as the money in a checking or savings account. When you use money you already own to pay for something, you’re using cash. When you use money you’re going to pay back later, you’re using credit. Since a debit card draws funds from a linked checking account, debit is the same as cash. When you’re comparing credit cards and debit cards, here’s where debit could come out ahead: When you re trying to stay out of debt
If you want to avoid credit card debt altogether, you have two options — either pay off your credit card bill in full every month or make every payment in cash. Making every payment with a debit card to avoid credit card debt can be a smart financial move. If you are trying to , for example, a debit card can keep you from spending more than you can afford. Likewise, many people working to decide that they’ll only use debit cards until they’ve paid their debt in full. When you need to pull out cash
When it comes to pulling out cash, debit cards are by far the most viable option. When you take out cash against your credit card’s limit, you must pay back the money borrowed. But the catch is this: The interest rate for a is always much higher than the interest rate on credit card purchases, and there’s no grace period. Meaning, that cash advance will start accruing interest immediately. If you have the option to pull out cash from your debit card, do so. You can avoid unnecessary fees and interest charges by going this route. If you can visit an ATM that is associated with your bank, you most likely won’t pay any fees at all. When you want to save money on interest
The is currently hovering around 18 percent, making it quite costly to carry a balance on a credit card. If you’re currently working on paying off your high-interest credit card debt, put your card aside and use your debit card for the time being. But continue to pay down your balance or else your credit score will take a hit. Which is safer
Both debit cards and credit cards come with safeguards to prevent fraud. When you use a debit card at a grocery store or gas station, for example, you are often required to provide a unique PIN. When you shop with credit online, you’re often required to enter your credit card’s three-digit security code. Banks and credit card companies are also constantly on the lookout for any transactions that could be potentially fraudulent. In most cases, they will send as soon as they notice suspicious charges or unusual activity on your account. That said, credit cards offer a few fraud protection benefits that debit cards don’t. Nearly all of offer zero fraud liability on unauthorized charges, which means you won’t owe a penny on any charge determined to be fraudulent. Debit cards also limit your fraud liability but require you to report your lost or stolen card within two business days to limit your liability to $50. If you report after two business days but before 60, your liability goes up to $500. If just your debit card number is stolen and not the card itself, you are not liable for unauthorized charges, as long as you report them within 60 days of receiving your statement. When it comes down to debit versus credit cards, you might decide credit cards offer better fraud protection. If someone , for example, you have time to dispute the charge before you’re liable for the payment and the pending charge may never even post to your account. If you use a debit card, though, the funds can be removed from your bank account directly and quickly, making the process of disputing and getting your money back much more time-consuming. The bottom line
When you’re considering debit versus credit, which should you choose? It depends. If you use your credit card responsibly and avoid making purchases you can’t pay off over time, the benefits of using credit cards — from increased rewards to enhanced fraud protection — often outweigh the potential costs. On the other hand, there are circumstances in which paying with a debit card can help you save money, whether you’re trying to stick to a budget or avoid credit card debt and interest charges. If you want the best of both worlds — the security of credit and the cost-effectiveness of debit — you might want to consider using your credit card like a debit card. If you’re going to charge a purchase to your credit card, make sure you can pay it off with the money that’s already in your checking account. As long as you pay your credit card bill in full every month, you’ll be using your credit card “like cash,” avoiding interest charges and staying out of debt — which means that when it comes down to credit cards versus debit cards, you’ll be making the best possible choice. SHARE: Nicole Dieker has been a full-time freelance writer since 2012—and a personal finance enthusiast since 2004, when she graduated from college and, looking for financial guidance, found a battered copy of Your Money or Your Life at the public library. In addition to writing for Bankrate, her work has appeared on CreditCards.com, Vox, Lifehacker, Popular Science, The Penny Hoarder, The Simple Dollar and NBC News. Dieker spent five years as writer and editor for The Billfold, a personal finance blog where people had honest conversations about money. Dieker also teaches writing, freelancing and publishing classes and works one-on-one with authors as a developmental editor and copyeditor. Poonkulali Thangavelu is a senior writer and columnist at CreditCards.com and Bankrate, addressing debt and credit card-related legal and regulatory issues. Related Articles