Credit or debit? The answer relies on a number of variables, such as personal choice and financial management skills. Here are some tips on how to use your debit card effectively and when you should use a credit card instead. When you’re making a purchase, that pleasant swipe (or tap these days) of plastic may be satisfying. However, should you use a credit card or a debit card while using a plastic card? Debit cards were “the most utilised and the most desired” according to a Federal Reserve poll on consumer payment patterns conducted in 2022. Of the participants, 44% preferred using a debit card over a credit card.
But each approach has advantages and disadvantages and being aware of when to utilise each might help you spend your money more wisely and get rewards for purchases. Debit cards do provide security against fraud and theft, but because they are directly linked to your bank account, they should be used with caution. To keep your PIN safe, be alert of your surroundings when using an ATM, and try to use it as little as possible while you’re travelling. Regularly review your statements, and immediately alert your bank to any questionable activity. According to Brooklyn Lowery, editorial director of credit card comparison website CardRatings, “Debit card fraud safeguards mainly depend on how promptly you report the theft, and a thief might deplete your bank account before you even notice your information or card has been taken.”
If you’re wanting to keep tabs on your expenditures, use a debit card
If you believe that using a credit card constantly may cause you to overspend, you can use a debit card for regular transactions. Vanessa Perry, the credit expert and proprietor of Impeccable Credit Services, advises utilising debit cards for daily spending aside from high-risk circumstances. With a debit card, it is much simpler to keep track of the money coming in and going out because you probably already know how much money is in your account and how much you are permitted to spend. A credit card might encourage impulse shopping if you’re not careful since it provides you access to money you don’t have.
If you don’t carefully control your spending, you might easily go into credit card debt and lose money due to excessive interest rates and late payment costs. Stick to utilising your debit card if you’re more likely to carelessly swipe your credit card when shopping online or in person. Jamilah N. McCluney, a financial counsellor and strategist at Black Wealth Financial, advises using your debit card as you would cash. “Do you have enough cash on hand in your checking account to pay for your purchase? Swipe aside if so.” You might also acquire a charge card, a form of credit card where you must pay your monthly statement in full. This is more like a debit card and will help you stay within your budget while assisting in the development of your credit.
To get cash out, use a debit card
Use your debit card to withdraw cash. Although it may seem apparent, make sure you are mindful of your surroundings at the ATM or use an ATM within a bank to protect the security of your information. Withdrawing cash using a credit card involves a cash advance, which Lowery describes as “a form of transaction that generally comes with costs as well as a high-interest rate.” If you can’t get to an ATM, you might potentially use your debit card at the grocery shop and earn cash back that way.
Using a credit card when purchasing online is safer
To prevent your debit card information from being spread throughout the internet, use your credit card while purchasing online. According to Ted Rossman, senior industry analyst at CreditCards.com, “Chip-enabled cards are really excellent at preventing in-person fraud but it doesn’t help you online, and that’s where the majority of the fraud has gone.” Make sure your credit card is saved as the preferred payment option instead of your debit card in your browser and shopping applications, or you may erase both to make it more difficult for you to overspend online.
In an emergency, use a credit card
When an unforeseen cost arises and you need some time to pay it off, use your credit card. To prevent paying excessive interest, McCluney advises paying more than the minimum amount due on your credit card. These can include unexpected costs while you’re travelling, like a flat tyre, as well as other purchases and maintenance.
Any regular payments must be made using a credit card
It’s a good idea to charge any regular expenses you have, such as Netflix, Amazon Prime, or Spotify subscriptions that renew each month or annually, on your credit card, preferably an older one that you don’t use as frequently. As long as you are making your payments on time, recurring payments will keep that line of credit open, allowing you to keep improving or maintaining your credit score. You might squander a lot of money on subscriptions you no longer use or that you forget you signed up for, so make sure to check your credit card bills so you know which subscription services you’re being paid for.