Credit vs. Debit: Why You Must Use Your Credit Card

When it comes to spending money, we can either use a debit card or credit card. We need to learn which situations will work best for either one and when a credit card is the best option between the two.

When using a credit card, you have more power if used responsibly, but you will face financial problems such as paying interest if you don’t pay your bill in full. You should avoid credit card debt, but using them can also provide you with many benefits, such as improving your credit profile and opportunities to earn rewards.

It’s imperative that when you do choose to use your credit card, that you treat it like a debit card. This means that you should avoid spending more money than what you have and not paying the minimum amount on your balance. Doing this will result in interest fees, so you should instead be paying the total balance off every month.

So, why should we be using our credit cards over debit cards? Below are a few reasons why you should use your credit card instead.

As an added safety measure, your credit card has strong protection from fraud. If someone steals your card and tries to purchase with your credit card, and you immediately report it, your card can get frozen with a pending investigation. You get to remain stress-free, as the money won’t leave your account.

However, if a thief steals your debit card and makes a purchase or withdrawal, you will immediately lose the cash from your checking account. You could potentially lose money that’s intended for expenses such as your rent or utility bill. Banks offer basic fraud protection on debit cards, so you will have to wait longer for an investigation process before getting your money back. This could also potentially affect your credit score.

Visa and Mastercard networks provide zero liability coverage for any unauthorized purchases to encourage credit card usage over debit cards and checks.

Your credit profile contains information regarding loans you have applied for previously, as well as what you’ve held and paid for. If you’re responsible with credit, you will have a positive score, whereas you will find yourself with a low score if you are missing payments or lack a credit history.

Using and paying for your credit card in full each month raises your credit score, resulting in possibly getting approved for a mortgage loan or any other major loan. You’ll also most likely get approved at lower interest rates.

On the other hand, using a debit card does not affect your credit history in any way.