Credit or Debit card, when to use each one?
The benefits and great value offered by credit cards versus the debt-free approach of using a debit card. Make an informed decision when choosing your payment method.
According to a study released in 2020 by the Federal Reserve Payments Study, debit cards are used almost twice as often as credit cards. However, in terms of money spent, credit cards have a solid 30% advantage over debit card payments.
The use of a credit or debit card depends on several factors, such as your level of comfort with debt, your ability to pay later, and your willingness to accept certain risks in exchange for certain rewards.
Here’s a quick reference on how and when to use each:
- You can’t stand the thought of being in debt even for a moment: Debit
- If delaying payment for a purchase temporarily is your preferred option: Credit
- If you are already carrying credit card debt and it is hard to make payments: Debit
Credit card benefits:
- Travel insurance
- Rental car insurance
- Possibility to achieve a great credit score if used correctly
- Most frequently offered discounts
- Reward Points
- Frequent-flyer deals
- Extended product warranties
Debit Card Benefits:
- Resistance to impulse shopping
- No need to deal with monthly payments
- Prevents overspending
- Helps avoid future financial disaster
- No high interest rates
If you are already in significant credit card debt, it is very important to discontinue the use of credit cards immediately. The responsible use of credit requires financial discipline, and even disciplined users can easily get into debt problems when facing difficult circumstances such as the loss of a job or major emergency expenses.
