Credit vs. Debit: Here's What Americans Prefer

Most Americans pay for purchases with credit and debit cards. After all, paying by card is faster and more convenient than paying in cash.

Even though credit cards and debit cards look similar, they have some notable differences. Most importantly, a debit card is tied to your bank account, while a credit card is a revolving line of credit in your name. If you're not sure which is better, here's what Americans prefer and how to pick the right payment method.

More people have debit cards -- but it's close

A staggering 242.7 million U.S. adults had debit cards in 2021, according to credit and debit card statistics collected by The Motley Fool Ascent. That's 93% of U.S. adults. Credit cards are also common, as 214 million U.S. adults (82%) had one or more in 2022.

Overall, 28.7 million more Americans have debit cards than credit cards. While debit cards are more popular by this measurement, it's worth mentioning that most checking accounts include a debit card. Lots of adults may have a debit card by default just from opening a bank account. But it doesn't necessarily mean that debit cards are their preferred payment method.

Americans spend more with credit cards

There was $10.4 trillion in purchase volume on credit and debit cards in 2022. Credit card spending accounted for $5.6 trillion (53%). Debit card spending accounted for $4.9 trillion (47%). Even though more people have debit cards, Americans as a whole spend $700 billion more on credit cards.

Credit cards are the better way to pay

It's a close race between credit cards and debit cards in terms of popularity. However, when it comes to which is better, credit cards have a few key advantages.

Credit cards can help you build your credit 

When you make purchases and pay them off on time using credit cards, it raises your credit score. A high credit score has a variety of benefits, including lower interest rates on loans and even lower insurance rates in most states. Debit card purchases don't affect your credit score.

You can earn rewards on your spending 

There are cash back credit cards that generally earn anywhere from 1% to 6% back on purchases. There are also travel credit cards that earn rewards you can redeem for travel purchases. Most debit cards don't earn cash back or points. While there are some rewards debit cards, they don't earn nearly as much as what top rewards cards offer.

They have better fraud protection 

By law, you're only liable for a maximum of $50 in unauthorized credit card purchases. On unauthorized debit card purchases, you could be liable for $50, $500, or the full amount depending on how quickly you report it. Many credit and debit cards offer $0 fraud liability, though.

The downside of credit cards is the risk of credit card debt. You need to be careful to only spend what you can afford. It's very easy to go into debt with credit cards.

There's no risk of that with a debit card, because you're not borrowing money when you use one. For that reason, it's often recommended to treat your credit card like a debit card -- only use it for purchases you can afford with money in your bank account.

If you can do that, and you pay your credit card bill in full every month, then a credit card is the best choice. It's good for your credit score, and rewards can be a valuable benefit that you don't get from a debit card.