When To Use Debit Over Credit and Why It Matters

You probably have, or are thinking of getting, a debit card. And the same is true for a credit card. But what exactly is the difference between the two — and when should you use one over the other?

Debit Cards

Using a debit card is just like using cash. A debit card links to your bank account, most often a checking account. If you buy a $10 item with your debit card, that money transfers from your account to the retailer. If you don’t have enough money in your account to cover a purchase, you can’t buy it with debit. 

Credit Cards

A credit card links to your credit card account. This is money that a financial institution is willing to lend you. If you purchase a $10 item with your credit card, that adds $10 to the balance you have to repay. If you don’t pay the balance in full each month, then the amount you owe collects interest, so that item will end up costing more than $10.

When To Use Debit Cards

Here’s when it makes sense to use your debit card:

• When you want to avoid debt: Maybe you struggled to repay your credit card balance in the past, or maybe you just don’t like the idea of debt. Either way, using your debit card avoids incurring any debt.
• If you value immediacy: There’s no lag with a debit payment. It doesn’t take time for the card issuer to process the payment, so you’ll have an instant reflection of your finances.
• If you want to avoid interest charges: Even if you can pay off your credit card balance every month, there’s always a chance you could forget. Using debit eliminates that worry.
  
• To avoid fees: Securing a credit card often — but not always — requires paying an annual fee. Debit cards typically come free with your bank account.

Debit cards keep you in control of your finances. You may also find it’s easier to track your spending with a debit card. Instead of piling debt onto a rolling balance you’ll pay off someday, using debit limits what you can spend to the money you have.

When To Use Credit Cards

Credit cards have their benefits, too. Here’s when it makes more sense to pay with credit:

• If you want to earn rewards: Not all credit cards offer perks, and not all debit cards are reward-free. However, benefits are much more common with credit cards, which may offer cash back, travel points or other rewards plans.
• If it’s a big purchase: Sometimes it makes sense to make a purchase you can’t fully pay for immediately. Maybe there’s a big sale somewhere, or you just really need a new laptop right now. Using credit gives you that flexibility.
  
• To build your credit score: Using debit has no effect on your credit score. However, you can build positive credit by using your credit card and paying the balance off every month.

Have More Questions?

Still wondering about your credit¹ and debit options? Contact a Vectra Bank professional today, and we’d be happy to help you.

 ^{1Subject to credit approval. Certain terms, conditions, and restrictions apply. See the Consumer Credit Card Agreement and Disclosure Statement for more details}