“Will you be paying with debit or credit?”
That’s the one question I get asked almost every day. When it comes to paying with plastic, there are debates about which one is better. Generally, I prefer to pay with credit but the decision to hand over your debit or credit card really depends on the type of purchase you are making.
Some people think credit cards are too great of a temptation and prefer to stick with debit cards. Others like the “freedom” of credit cards and use them to accumulate points and build credit. Regardless of which type, most of us carry at least one type of payment card. It’s more convenient than cash and checks, and the transaction shows up soon after you swipe your card.
A generation ago, it wasn’t that unusual to be out at a movie with friends or at the register with a cart full of groceries and realize that you didn’t have enough cash to cover the bill. But today, you’d probably just pull out a debit or credit card and not think anything of it.
Though the two types of cards may be used interchangeably, there are some distinct differences between them. Let’s start with debit cards.
Debit cards are linked to your bank account so the money you spend is automatically deducted from your account. It’s a convenient alternative to cash and can help you stay within your budget. Unlike credit cards, your balance goes down with each debit card transaction, so this might deter you from overspending. In addition, using a debit card may prevent you from racking up interest and late-payment fees, so you won’t hurt your credit score.
So why use a credit card at all? Well, there are several reasons why credit cards are attractive. 1) You can spend more than you currently have and pay it back later. 2) If you are responsible with credit, you can use it to build up your credit profile. 3) Credit cards generally offer better rewards and protection than debit cards do.
It’s best to use a credit card if you’re buying a big ticket item like electronics. The credit card purchase gives you a number of protections that a debit card doesn’t. For example, if you pay with your credit card, you can dispute the charge if there’s a problem with the product. The credit card company will pursue the issue with the retailer, and you won’t be responsible for the charge until the matter is settled. When you use your debit card, not only will the money be taken out of your account right away, but in many cases, you will be responsible for getting your own refund.
So, back to the big question: debit or credit?
Personally, I like to use my debit card or cash for smaller purchases (less than $20), and I tend to use my credit card for everything else. I guess that means my answer is credit.
For most people though, using both a debit card and credit card makes sense. The key is to use them responsibly and to not spend more money than you have (always try to pay your balance in full). If you can do that, you’ll be able to enjoy the benefits that each type of card provides.