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- Credit cards can be convenient and appealing, but there are times it makes more sense to use debit.
- If you can't pay off your credit card balance, consider a debit card while you pay down that debt.
- You can also use a debit card to control overspending and to withdraw cash.
Conventional wisdom is that it is often better to use a credit card than a debit card for numerous reasons: secure transactions, buyer purchase protection, and generous rewards and points.
But there are times when using a debit card might be a better option. In fact, a 2022 survey by the Federal Reserve on consumer payment habits found that debit cards were "the most used and the most preferred" — 44% of the participants said they preferred to pay with a debit card, while 32% chose a credit card.
If you run into the age-old question "Debit or credit?" here are situations where you might want to use a debit card, so you can choose the best option for you.
1. You are trying to control your spending
It is much easier to track how much money is going in and out of your budget on a debit card — typically, you know how much is in your account and how much you're allowed to spend. A credit card can enable impulse spending because it gives you access to money that you really don't have.
You can quickly fall into credit card debt and lose money on high interest rates and late payment fees if you don't manage your spending properly. If you're more prone to impulsively swiping your credit card online or in person, stick to using your debit card.
You should be treating your debit card like cash. Either you have the money in your checking account to cover the purchase or you don't.
2. You need to withdraw cash
This one might seem obvious, but use your debit card to withdraw cash. You can use a credit card to withdraw cash, but it requires a cash advance — a credit card transaction that often comes with fees as well as a high interest rate, which can be even higher than the rate on regular purchases. If you can't go to an ATM, you could also use your debit card at the grocery store to get cash back that way.
3. You cannot pay off your credit card balance in full every month
The preferred way to use a credit card is to pay off the balance every month. But there may be times when that is difficult to do. Carrying a balance every month often leads to debt and definitely results in high interest rate charges, and even late payment fees, if you fall behind.
With credit cards' high interest rates, it might make sense to use your debit card instead of a credit card if you find yourself unable pay off the existing balance and manage overspending.
If you already have credit card debt, don't add to it by continuing to use the credit card. Use your debit card for everyday purchases while paying down your debt. You can also consider a prepaid debit card, which is similar to a regular debit card but isn't connected to a checking account. Some, like Step Banking, will help build credit.
