Bank Debit Cards vs. Credit Cards: Does It Matter?

If you open any wallet, you’ll find that most people have at least one debit card and one credit card. This is how they pay for things, such as groceries, gasoline and personal items. Some people prefer one over the other; and if you’re deciding the best card for your need, you may question whether to stick with a bank debit card or take a chance with a credit card.

At the end of the day, there are no wrong or right answers. There are many reasons why some prefer credit whereas others prefer debit. about a year back I posted on same topic, whether to use a credit card or debit card? If you’re on the fence and can’t decide the best approach, it pays to consider the benefits — as well as the disadvantages — of both methods of payment.

Pros and Cons of Bank Debit Cards

1. Even though bank debit cards are not credit cards, they are widely accepted at most retail stores and restaurants. And if your bank issues a debit card with a MasterCard or Visa logo, you can use these cards in hundreds of countries when traveling internationally. Debit cards are much safer than carrying cash. Also, if you need to track your spending for personal or business reasons, debit cards allow for easy budgeting.

2. You must have cash in a checking account to use a debit card. Unless your bank offers overdraft protection, using a debit card without adequate funds may result in a retailer rejecting your card, or you might get hit with overdraft fees.

3. With a bank debit card, you can only spend what you deposit in your account. This is an amazing incentive if you want to avoid credit card debt. By avoiding debt you’ll also avoid interest charges and other fees, such as late fees and over-the-limit fees.

4. Some credit cards have annual fees. This is not the case with debit cards. In fact, many banks and credit unions give account holders a free debit card just for opening a checking account.

(Also Read  – How to prevent credit card fraud)

Pros and Cons of Credit Cards

1. Unfortunately, a bank debit card will not improve or establish your credit history. If you’re looking to build credit, you will need a credit card from a bank or credit card company. These creditors report to the bureaus on a monthly basis. Positive activity such as timely payments can build your score.

2. Credit cards are an excellent choice when you don’t have cash. For example, if your car needs a major repair and you won’t have cash until payday; a credit card lets you take care of the repair today. You can pay off your credit card at a later time. However, credit cards can also be a dangerous choice when you don’t have cash. “By paying for purchases in cash, you are scientifically less likely to spend as much money than if you paid with a credit card,” says Natalie Cooper, a financial expert. So, while credit is a godsend when you’re cash-strapped, using plastic increases the risk of overspending.

( Related – 14 reasons not to live with a credit card)

3. Depending on your bank or credit union, your debit card may include a rewards program. However, these programs are more common with credit cards. The more you use your credit card, the more points you earn. Points are redeemable for gift cards, merchandise, travel, statement credit, and more. Reward programs are a way to save money on future purchases.

4. Unlike some debit cards, credit cards come with additional perks. For example, if you use your credit card to purchase an electronic item, you might receive an extended warranty. Some credit cards include travel insurance, which can cover the cost of lost luggage or trip cancellation. Also, if you rent a car with your credit card, you might be eligible for free car rental insurance. Contact your credit card issuer to learn about other perks or benefits.

Bottom Line

In the end, there are benefits to bank debit cards and credit cards. When determining the right card for your wallet, take your spending and lifestyle habits into consideration. Although a credit card is useful for establishing a credit history and earning reward points, a debit card might be a better match if you have a spending problem or if you want to avoid costly debt.

(Also Read – Making most of your credit card)

Readers, you must be using either one of them or both. What’s your rationale behind the type of card you generally use most of time?