When to Use a Credit Card vs. a Debit Card

By Lynnette Khalfani-Cox, The Money Coach®

For a variety of reasons, some Americans hate using credit cards. Many worry about getting into debt, while others fret about fees or high interest rates.


If you’re a credit-card averse consumer, realize that all financial products have their pros and cons. Plastic, in any form, is just a tool. Used wisely, a credit or debit card can help you — used in the wrong way, they have their pitfalls.

According to a poll from the Federal Reserve, when asked how they would usually make a $10 purchase at a local store, more than 37% of respondents said they would use a debit card, followed by cash (36.8%) and then a credit card (24.3%).

When should you use a credit card versus a debit card? Here are some quick ideas that can help.

When to Use a Credit Card

If you’re trying to build your credit rating, a credit card is your best bet. When you make monthly charges on a credit card and pay your bills on time, you will boost your credit score — something that doesn’t happen when you’re using a debit card. If you can pay your balance in full monthly, you can avoid interest charges and possible get rewards like cash back or reward points. A credit card can also be advantageous when you need payment flexibility, such as when you want to finance a large purchase and pay for it over an extended period of time. On the downside, you may incur interest charges for that privilege.

Lastly, a credit card can come in handy when you face an emergency that was not anticipated and you don’t have the cash on hand to cover the expense.

When to Use a Debit Card

If you’re concerned about overspending or driving yourself into debt, you might be better off using a debit card. With a debit card, you don’t have to worry about interest rates and finance charges being added to the cost of your purchases. Be forewarned: a debit card isn’t necessarily fee-free and using one won’t automatically stop you from any bad financial habits you haven’t yet conquered.

For example, if you overspend with a debit card, you could be subject to overdraft charges or NSF fees. Still, a debit card may force you to better budget your money and to stick to spending only what you have on hand.

Ultimately, credit cards and debit cards each have their pros and cons. Part of being a financially savvy consumer is to understand the feature, terms and, yes, even the drawbacks, of any financial product you choose.

With the information above, you’re better armed as a consumer no matter what your preferred form of plastic.



When you click on external links, you are linking to alternate websites not operated by SchoolsFirst FCU, and SchoolsFirst FCU is not responsible for the content of the alternate websites. The fact that there is a link from SchoolsFirst FCU’s website to an alternate website does not constitute endorsement of any product, service, or organization. SchoolsFirst FCU does not represent either you or the website operator if you enter into a transaction. Privacy and security policies may differ from those practiced by SchoolsFirst FCU, and you should review the alternate website’s policies.

Extra Credit provides general information to help improve our Member’s financial lives. Every situation is different, so please contact us for guidance on your specific needs. The advice provided in Extra Credit is not intended to serve as a substitute for speaking to a loan representative, financial advisor, or GreenPath Financial Wellness counselor who can help tailor a solution for you.

If you post a comment, we will make every effort to respond or contact you directly. We reserve the right to delete comments that contain personal information, unauthorized content, or are generally inappropriate.


2 thoughts on “When to Use a Credit Card vs. a Debit Card

  1. This article needs to be updated with more specific information about the pros and cons of each type of card. I was trying to explain to my 92-year-old father (your customer) why it was more prudent to use a credit card for gasoline purchases, for example. I was trying to illustrate the frequency of “skimming” and the protection afforded by credit cards against unauthorized expenditures. There are many other benefits (rewards programs, insurance coverage, extended warranties) as well as some drawbacks to using credit over debit. It’s changing rapidly, too.
    Particularly for the security of your older customers, please give this topic more coverage.

Leave a Reply

Your email address will not be published. Required fields are marked *