When should you use each?
If you’re like most, you have both a debit card and a credit card in your wallet. How do you decide which one to use and when? This is a question that has had people perplexed since credit cards became a common shopping tool.
There are no hard-and fast rules, and purchasing preferences differ from person to person. In general, however, there are some situations in which it may be better to use credit and other situations where you might want to use debit.
At the ATM: Use Your Debit Card
Most credit cards do come with some sort of cash advance agreement. What this means is that you can go to an ATM, swipe your credit card, and have cash-in-hand within minutes. However, doing so will cost you; most credit card companies do have a substantial fee for cash advances. If you can, you will want to use your debit card when you take cash out at the ATM. There may be a transaction fee, but it is usually minimal, and if you find an ATM associated with your financial institution, you probably won't pay anything.
At Hotels: Use Your Credit Card
When you stay at a hotel, the hotel will typically leave the charge open until you leave to ensure they are able to bill you for any damage you cause to the room or extra services you might utilize. If you pay by debit card, they may withdraw an extra $100 or more from your account to cover these incidentals and then deposit it back into your account a week later. This means you cannot spend that money in the meantime, which is certainly not convenient! It's a lot easier to pay with credit; everything will be settled by the time your credit card bill is due.
For Monthly Bills: Use Credit or Debit
When it comes to monthly bills, either card is a good option. Both allow you to set up automatic payments, making it a convenient option to ensure your bills are paid on time. Just be cautious if you do use your debit card, that you have funds available in your checking account the day your bills are paid. If your balance fluctuates throughout the month, it may make more sense to put these bills on a credit card to ensure you don’t become overdrawn.
For Splurge Purchases: Use Your Debit Card
If you’re worried that you might go over-board with a splurge purchase such as boots and clothes, dinner with friends, or new tech tools, use your debit card. You will actually see the money coming out of your bank account, so you’ll be less likely to overspend than if you were to use your credit card.
For Everyday Expenses: Use Credit or Debit
For expenses like groceries and gas, either card is a good idea. In addition to credit cards, many debit cards now offer rewards or incentives when you make purchases. If you are going to make these purchases anyway, you might as well get rewarded!
The credit card versus debit card debate probably won't end anytime soon, but at least you should now have a better idea of what card to use when. It's a good idea to have both in your wallet, so you can change your spending habits as needed.