by Lyle Daly | Jan. 1, 2019
The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Debit or credit? That’s the big question now that cards have supplanted cash as the most popular way to pay.
Debit cards are still the payment method of choice for many consumers since they’re easy to get and don’t carry the potential for credit card debt. But when you really look at the benefits of each type of card, it’s clear that using a debit card is a poor choice. Here’s why you should stop using your debit card and pay by credit card whenever you can.
Get free access to the select products we use to help us conquer our money goals. These fully-vetted picks could be the solution to help increase your credit score, to invest more profitably, to build an emergency fund, and much more.
By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.
Like it or not, your credit score is an important part of your financial history. And you’re not improving your score at all by using a debit card.
A credit card, on the other hand, is one of the most effective ways to build your credit score. If you use your credit card regularly and make your payment on-time, you’ll build a positive payment history, which plays the biggest role in your FICO® Score. Credit utilization plays the second-biggest role, and that’s another factor you can control with responsible credit card use.
There used to be plenty of banks offering rewards on debit card purchases, until legislation limited the fees that banks could charge merchants on debit card transactions. Because of that, hardly any banks offer debit cards that earn rewards, and the debit cards that do have rates of 1% back or less.
Credit card rewards can be extremely lucrative if you know how to maximize them. Even if you don’t want to do much research on rewards, you could keep it simple and go the cash-back route, where the top cash-back cards can earn you 3%, 4%, or even 5% back in specific spending categories. Or, you can check out the best travel rewards cards and earn points to pay for your vacations.
As you know, your debit card is directly connected to the money in your bank account. This can be an issue if you need to dispute a transaction, whether it’s due to fraud or a problem with the merchant, because you won’t get your money back right away. Your bank must complete their investigation first and find in your favor, which can take weeks or longer.
When you dispute a credit card transaction, your card issuer freezes that transaction until they’ve done their investigation. You don’t need to pay anything during that time, so you won’t need to worry about being out any money while you have a dispute in progress.
Like rewards, purchase protections are another area where credit cards trump debit cards. Debit cards rarely have much in the way of purchase protections, and even if they do, they’ll pale in comparison to what a credit card could offer.
Protections vary depending on the card, but many of the best credit cards will include a lengthy list of them, such as:
While credit cards with annual fees usually have the most protections, there are plenty of great no-annual-fee cards with helpful coverages, as well.
If you’re still pulling your debit card out at the store or online, it’s time to make a change. The only potential downside of switching over is the possibility of credit card debt, but that’s easy to avoid.
Just maintain the same spending habits you had with your debit card and always pay your statement balance so you don’t rack up any debt. The end result is the same -- you’re paying for everything with the money in your bank account. You’re just using a credit card first, which means you’ll also be helping your credit and collecting rewards along the way.
If you have credit card debt, transferring it to this top balance transfer card can allow you to pay 0% interest into late 2022! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.