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Will that be debit or credit today? You’ve probably been asked this question at the register more times than you can count. If you’re like many Americans, the choice may not even matter to you. But it should, and here's why.

Whether you make your debit-versus-credit decisions based on convenience or financial discipline is up to you. However, there are a few occasions when pulling out your credit card should be a no-brainer. It can not only provide you with certain benefits but also protect you and your purchases for years to come. And as long as you set aside the funds right away, you won’t feel a pinch when your statement is due and won’t risk digging yourself into debt.

Let’s talk about some situations where you should never think about using a debit card. Then, we will discuss a few instances where you always should.

When to Use Credit


If you’re buying online, it makes sense to use a credit card over a debit card whenever you can, simply for added protection.

While many websites today put an emphasis on security, it’s not that way across the board. Plus, there are web breaches all the time, compromising not only your personal information but also your payment methods. Lastly, there’s the chance of an online vendor inadvertently processing your order more than once, which could put a serious dent in your account balance.

By using a credit card over a debit card when you buy over the web, you can help mitigate these risks.

If your debit card number is compromised and your account is fraudulently charged, your credit card company will work with you to correct the issue. They have the ability to reverse a charge while they investigate, too, putting the issue “on hold” until a resolution is found. Of course, there’s always the peace of mind that comes with knowing that credit card charges aren’t due right away; those extra few weeks of wiggle room give you time to spot an error, call attention to it, and fix it, long before your statement balance is even due.

On the contrary, debit card-related fraud is much more difficult to correct. While your bank will cancel your card and issue a new one, you will typically be out of luck for the fraudulent charges until the investigation is complete. The bank is unlikely to put that money back in your checking account in the interim. So, if someone steals your card number and makes a $1,000 charge, you’ll feel the pinch of that missing money until the issue is resolved.

Lastly, using a credit card for an online purchase will provide you with added protections in case that order never arrives or isn’t quite what you had expected. Depending on the card you carry, you can request a chargeback for purchases within a 60-90 day window if the item you buy never shows up, is completely different from the description, and/or if the vendor refuses to correct the problem. Debit cards rarely offer similar protections.

At the Car Rental Counter

If you’re renting a car on your next trip, you’re better protected when you pull out your credit card at the counter, versus your debit card. Credit cards today will not only protect you from the pinch of a high-dollar hold during the rental period, but may also offer added protections for the vehicle itself.

If you pull out your debit card at the rental car counter, you will find that the process is a bit different. First, the company may want to run your credit–a common route when the customer cannot offer a credit card for the reservation. Second, you can expect your deposit amount to often be higher with debit cards than with credit. The actual dollar amount varies from company to company, but authorization holds are often many times larger when placed on debit cards.

Of course, you’ll be out those available funds during the car rental period. While a credit card authorization hold would disappear before your statement was even due, a debit card hold will impact your available cash balance. That hold usually takes a few days to clear even after you turn the vehicle back in, creating a potential cash flow situation.

Lastly, there are added protections offered by many credit cards today, which would protect you if something happened to your rental car while you have it. Whether someone sideswipes a mirror overnight or you’re in an at-fault accident, cards like the UnitedSM Explorer Card offer primary coverage on rental vehicles. This means that they will foot the bill for liability as long as you pay for the rental with that card (read the fine print, of course, as there are some exclusions).

You won’t find that with a debit card!

When Booking Travel

Even the best-laid plans go awry sometimes, and that’s especially true with travel. Whether your next trip is for business or pleasure, you’re likely putting a lot of money on the line when you book a flight or cruise, accommodations, and even rental cars. Many of these expenses are non-refundable, too, meaning that you will lose some or all of your funds if you need to cancel.

This is why you should use a credit card every single time you travel.

Take my favorite travel card, for example: the Chase Sapphire Preferred®. This all-around wonderful product offers a slew of travel-related protections at no additional charge, and will cover my investment whether my trip is cancelled due to a plane’s mechanical failure, a tropical storm, or even my kids getting sick. It also provides me with baggage protection in case my suitcase is damaged or lost, and even baggage delay reimbursement so I can buy clothes and a toothbrush if the airline loses my bag for a day on my next vacation.

If I need to stay overnight in a hotel because weather or an airplane issue causes me to miss a connecting flight, they have my back there, too. They’ll reimburse me for a hotel stay, meals, and even toiletries.

The best part? None of these added protections will cost me a penny in trip insurance. I only need to book my trip on the card and I’m covered.

When Buying a Big-Ticket Item

It’s always a little scary to make a really big purchase. Whether ordering new furniture for your home or replacing the big screen TV in your living room, these types of expenses shouldn’t be taken lightly. This is yet another reason to use a credit card.

If you have an issue with the item itself–it’s defective, it never arrives, the vendor won’t return the item, etc.–your credit card company will step in to help resolve the issue. Many card products go beyond that, though, to offer additional benefits and coverage.

For instance, cards like the Citi® Double Cash Card offer a price rewind feature. This means that if the cost of your item drops in a specific period of time (60 days, as of this writing), you can file a claim to get the difference credited back. This applies to Black Friday and other big sales, too! So, if you buy an entertainment center on Tuesday and it goes on super sale the following weekend, you’ll get the difference back.

Many cards also offer complimentary extended warranties. If the manufacturer offers a 1-year warranty on your new computer, cards like the Capital One® Venture® Rewards will double that, offering you a total of two years of protection.

Some cards will even offer protection against damage or loss. Many even cover you if your cell phone is too damaged to use or stolen after purchasing it with the card!

When a Rental Requires a Deposit

This one is mainly a matter of convenience, but it’s worth choosing credit over debit all the same.

If you are renting an item–such as a tool or piece of machinery–and are required to put down a deposit, use a credit card. This will not only protect you against future disputes, but you’ll also avoid feeling the pinch of that deposit on your available checking account balance.

Many deposits will hold for a few days after the rental is complete, taking as much as a week or two for you to see the funds released back into your account. Depending on the deposit amount, this hold can be quite the inconvenience. It could even lead to NSF charges or overdrafts, if you don’t manage your remaining balance perfectly in the interim.

When You Can Earn Rewards

One of the best inventions (in my opinion) is the rewards-based credit card. I spend the exact same amount of money each month that I would have anyway–buying groceries, gas, paying utilities, and doing the occasional shopping for myself–but I rack up thousands of points in rewards each year. Those points go toward my flights home for Christmas or can even be used as statement credits. It’s truly a win-win for me.

If you have a credit card that earns points or miles (and you should!), it’s smart to use it as often as you can on everyday purchases. As long as you’re disciplined enough to pay off the full account balance each month, avoiding high interest and a possible debt spiral, it’s smart to earn free cash where you can.

When Debit Makes Sense

There are a few instances when using a debit card makes sense, even over a credit card that earns cash back rewards. Here are a few of them.

When There’s a Fee

If you’re looking at paying a fee for a credit card transaction–such as when paying things like rent or tuition–just use a debit card. Typically, those fees will cancel out any rewards you might earn, and may even cost you beyond that.

When You Can’t/Won’t Pay the Full Balance

If you know that you have trouble paying off your credit card statement in full each month and that you’ll be at risk for building up a balance, avoid credit cards altogether. Rewards and protections aren’t beneficial enough to warrant high-interest debt that you’ll then struggle for years to overcome.

You’re Trying to Get a Handle on Your Budget

If you’re trying your hand at money management and keeping a budget for the first time, debit cards might be the better option (at least for a little while). When you use a debit card, the money is debited from your balance right away, so you feel it “spent” sooner. With a credit card, you don’t feel the pinch until the statement comes weeks later, so it can be tempting to overspend and you may even forget about purchases altogether when they’re out of sight, out of mind.

The choice of credit over debit is a personal one. If you’re interested in complimentary protections, added benefits, and cash back rewards, credit is the way to go. It’s a superior product in many ways, as long as you are responsible with your spending.

If you’re struggling to get your finances on track, would incur fees for paying with a credit card, or are already in debt, using a debit card is the smartest choice. You may lose out on certain benefits now, but your financial situation will thank you later.

Author Bio

Total Articles: 100
Stephanie Colestock is a respected financial writer based in Washington, DC. Her work can be found on sites such as Investopedia, Credit Karma, Quicken, The Balance, Motley Fool, and more, covering a range of topics such as family finances, planning for the future, optimizing credit, and getting out of debt. She is currently working toward her CFP certification. Her full portfolio can be found at stephaniecolestock.com.

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