Credit card vs debit card, which is the right card to use? Each time you open your wallet to pay for a purchase, you face this dilemma when you don’t want to pay in cash. You then ask yourself “Should I pay with my credit card or debit card?”
Choosing between a credit card and a debit card can be rather confusing. These two plastic cards look almost the same, and both are swiped or tapped on a point-of-sale (POS) terminal.
But using a particular card in certain situations makes a huge difference in your finances. Keep reading to know the difference between debit and credit card and when is the smarter choice to use one.
What’s the Difference Between Debit and Credit Card?
The key difference between a credit card and debit card lies on where the money used for payment is taken from.
Using a credit card means borrowing money up to a certain amount from your issuing bank to pay for your purchase. The total amount you can spend with your card per month depends on your credit limit. And since you’re borrowing from the bank, you’re expected to pay back what you owe by the due date.
On the other hand, using a debit card involves taking the money directly from your savings account or checking account soon after you pay for a purchase. You can keep charging transactions with your debit card as long as you have available funds in your bank account or until you’ve reached your daily POS purchase transaction limit.
Now, let’s deal with the credit card vs debit card debate. Which is the better card to use? It depends on what you’ll use them for and how well you handle your finances.
Credit Card vs Debit Card: Best Uses of a Credit Card
1. Paying for Big-Ticket Purchases in Installments
0% installment is a standard feature among credit cards in the Philippines. You can pay for your purchases in more manageable amounts over 12 to 24 months instead of making a one-time full payment.
This makes a credit card ideal for buying items you normally can’t pay upfront in cash, such as gadgets, appliances, and furniture.
Some credit cards offer purchase protection insurance that pays the cardholder a certain amount for every damaged or lost item charged to their card. Others provide extended warranties, too.
2. Online Shopping
The internet provides shopping convenience—but it isn’t a 100% safe place to shop. Using both the credit card and debit card for online purchases carries the risk of fraudulent transactions.
However, it’s what happens after an unauthorized transaction that makes all the difference. Credit cards are safer to use than debit cards, as credit cards offer more protection against unauthorized transactions.
If a hacker uses your debit card without your knowledge, the amount gets deducted from your bank account right away. In contrast, an unauthorized transaction charged to a credit card is quite easier to deal with. It’s technically the bank’s money—not yours—that’s stolen.
3. Travel-Related Bookings
Using a credit card is a better way to manage your finances if you travel frequently.
When you charge your travel expenses to your debit card, the amount is taken immediately from your account. Imagine how much will remain in your bank account if you’ve spent five-digit or six-digit figures for booking your flights, hotel accommodations, tours, and other travel essentials. You might be short of money for your living expenses.
With a credit card, you can book your travels without wiping out your savings account in one go. What’s more, you’ll enjoy travel perks such as air miles (which you can use to redeem free flights later), travel insurance, airport lounge access, and travel assistance.
4. Paying for Bills and Other Recurring Charges
Due dates of your utility bills are easy to forget if you’re paying in cash or debit card. The auto-debit arrangement feature of a credit card helps you automate payment for your bills and other recurring charges such as insurance premiums. This way, you avoid missing a payment and the hassles that come with it.
Also, bills payment is easy nowadays using mobile apps that accept credit card payments.
5. Getting Rewards and Promos
Credit cards allow cardholders to earn rewards points, cashback, or air miles that help them save money over time.
If you want to enjoy the rewards and promos offered by your credit card issuer, then it makes more sense to use your credit card for purchases that qualify for those perks. But be sure to pay the full balance—not the minimum—every month, so you can continue to avail of credit card rewards and promos.
6. Building a Good Credit History
Especially if you’ve never had a credit card or loan, you need to establish a positive credit history, so you can easily get approved for loans and credit cards in the future. When deciding credit card vs debit card, credit cards win for this certain reason.
Using a credit card responsibly is a great way to boost your credit score and make you creditworthy in the eyes of banks and other types of lenders. The bank reports your credit card payment history, credit utilization ratio, and the age of your credit card account to the credit bureaus. Such data are used to compute your credit score.
Debit card transactions aren’t included as criteria for determining a person’s credit score.
Debit Card vs Credit Card: Best Uses of a Debit Card
1. Everyday Purchases
If you compare credit card vs debit card, then the latter is safer to use for small purchases such as groceries and medicines. Because you’re paying directly from your bank account, it helps you minimize your daily expenses and stick to your budget.
2. Withdrawing Cash
ATM withdrawals are cheaper with debit cards compared to credit cards. When you withdraw money using your debit card, it’s free of charge if you use the ATM of your issuing bank. Withdrawing cash from an ATM of another bank will incur you a minimal service fee of PHP 10 to PHP 15 per transaction.
Withdrawing money using a credit card is a different story altogether. It’s an expensive way to borrow money, as banks charge credit card cash advance fees that are higher than regular interest rates. Fees range from 3% to 5% of the withdrawn amount or PHP 300 to PHP 600 per withdrawal, whichever is higher.
Make cash advances often, and you’ll end up maxing out your card and burying yourself in debt.
3. Controlling Bad Spending Habits
Do you often splurge and max out your credit card? Have an unpaid credit card balance each month?
It’s a sign that you’re having problems with your credit card use, and it’s time to curb that bad habit. To avoid drowning in credit card debt, it’s better to use your debit card until you’ve developed financial discipline.
The best thing about using a debit card? Unlike a credit card, a debit card makes it impossible for you to spend money you don’t have.
How about you? Credit card vs debit card, which one do you prefer to use? Which card is more advantageous for you? Spend wisely if you own both cards. Make sure to think before you swipe!
 Credit Card vs. Debit Card: Which is Safer for Online Shopping? (Creditcards.org, 2018)
 Accredited Credit Bureaus / Special Accessing Entities (Credit Information Corporation)
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