Personal Finance

I'm using my debit card to purchase everything but I'm being told it would be best to use a credit card for anything over $20 - is that true?

Joey Frenette

Published: December 11, 2024 11:52 am

Last Updated: December 11, 2024 7:57 pm

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.

The interest rates on credit card balances are absurdly high. And for the many Americans who make the minimum payments every month, the interest can really take away from your ability to build wealth. Undoubtedly, these incredibly high interest rates cause many folks, including this Reddit poster who’s facing the age-old credit vs. debit dilemma, to swipe their debit cards over their credit cards. After all, you can’t run up the personal debt tab that way!

To some who’ve run into trouble with mounting credit card debts in the past, it may seem like a good idea to leave the credit card at home, especially if there’s a sufficient amount in one’s checking account.

That said, there are drawbacks to putting every purchase on a debit card. And though you won’t run into any sort of financial trouble by going down the debit card route, there is a lot being left on the table by paying with debit over credit.

Key Points About This Article

• Paying with debit over credit may seem like a wise idea to some.
• If you can pay off your credit card balances before the end of the month, it’s worthwhile to swipe credit for the rewards and opportunity to build better credit.
• We’ve assembled some of the best credit cards for users today.  Don’t miss these offers because they won’t be this good forever. ^(Sponsored)

The upside of swiping your credit card over a debit card

Undoubtedly, many of today’s credit cards have some pretty awesome perks and respectable rewards. Whether you’re looking to accumulate travel points for a dream vacation or just want some cash back (some cards offer 1-5% cash back on the purchase of specific goods), every so often, there are some upsides to paying with credit cards, provided you pay the full amount every month.

Indeed, if you were going to pay for something with your debit card, you may as well put it in your credit card and pay off the amount as soon as you get home. That way, you wouldn’t be on the hook for interest on your credit card purchase, and you’d still be able to bag the rewards (let’s say 1-2% cash back).

Additionally, you’d also be taking steps to improve your credit score. The more you use it, the more opportunity you have to build credit. Of course, if you leave balances sitting for too long a duration, overutilize it (let’s say having more than 30% of your credit card limit used up) and interest builds up, you can also hurt your credit.

The key is using your credit card responsibly.

For those who would have otherwise used a debit card, though, I’d argue that swiping on credit and paying off the balance immediately or at the end of the week or month is the far better option.

Of course, if you lack the discipline to stay on top of credit card balances, there’s nothing wrong with going down the route of paying for things with debit if it keeps you from overspending or paying for big-ticket items you don’t have the funds to purchase with currently.

Indeed, credit cards can be a shot in the arm for consumers who pay off balances as soon as possible. They get all the perks (think the ability to access airport lounges or various forms of travel or consumer insurance included), rewards and even added security should one’s card fall into the wrong hands.

That said, if you’re tempted to spend with your credit card with the money you don’t have, perhaps it’s best to build better “financial hygiene” before putting everything on credit. Consulting a financial advisor seems advisable if you have unanswered questions or have difficulty managing consumer debts.

The bottom line

At the end of the day, credit cards are a great source of rewards and other benefits. However, one must ensure they build credit, not interest, on outstanding balances.

That’s why it’s vital to ensure you pay off all of one’s monthly balance and only spend with the cash you have. Some folks may view credit cards as a terrible thing because of the obscene interest charged. However, it really depends on how you use it. For those who leverage it effectively, it’s a powerful tool with a lot to offer.

Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.