Debit or Credit? 5 Situations Where One Card Has the Advantage Over the Other
Debit and credit cards appear similar, but there’s one major difference: debit cards spend money that you already have, whereas credit cards borrow money from the lender that you’ll owe later.
Due to the difference, there are certain situations where its more advantageous to use one method over the other.
Centers Health Care has five scenarios where we say which is the preferable method to pay.
- Making a Large Purchase
Credit cards offer more protection on all purchases, which is more important when it’s a large one. In addition, you can amass more rewards points through a large credit card purchase (see next point) and also have more time to pay the bill, whereas you will need to have the money up front for a debit card purchase.
- Take Advantage of Rewards
Some banks do offer some cash-back perks to spending on a debit card, but the volume of rewards is much greater with a credit card. And if you’re an avid traveler or a fan of a certain store or restaurant, a card bearing their name can earn more specific points and perks that you will use.
- Withdrawing Cash
A debit card is the way to go if you need access to cash. You can withdraw cash for free at an ATM affiliated with your bank, and even if it’s not, the fees are generally small to use a debit card to get cash. But to get a cash advance on a credit card, you’ll have to spend at least $10 in fees or up to 5% of the withdrawal amount.
- Want to Increase Your Credit Score
Your debit card usage will not count either way toward your credit score. If you’re carrying a balance, you can use your debit card to make everyday purchases while paying off your debt, but overall, using the credit card and making regular, on-time payments will improve your score.
- Need to Keep to a Budget
If carrying a balance on your credit card is a regular problem, you’re overspending and paying for it in the form of interest you will owe the longer your carry the balance. Debit cards do not allow you to spend money you don’t have.
