When Should I Use my Credit or Debit Card?

Many people have both a debit card and a credit card, but not many people are aware of the instances in which it is a smarter decision to use one over the other. 

There are facets for both types of cards that users should be aware of when making purchases; things like: 

• Reward points 
• Building credit
• Interest rates
• Saving money

When You Should Use a Credit Card

There are many situations where choosing to use your credit card can be beneficial to different aspects of your financial life. This includes:

1. For online shopping purposes. This is to ensure the safety of your debit card information; so it won’t end up in other places on the internet.
2. For recurring payments. This can include subscriptions you make every month, like streaming services, Amazon Prime, or music services. Payments like these will keep a line of credit open, increasing your credit score (as long as monthly payments are made on time).
3. For emergencies. Unexpected expenses can always come up, and you may need some time before you can afford to pay them; that is where your credit card comes in with available funds until you have the amount needed.

When You Should NOT Use a Credit Card?

Although certain purchases can be put on your credit card for beneficial purchases, there are certain purchases that can actually do the opposite, and negatively affect your financial livelihood. These can include:

1. Resident mortgage payments. By doing this, you will have interest debt for both mortgage and your credit card, which can certainly add up. (Most mortgage companies will not even allow payments through a credit card).
2. Household utility bills. If you use a credit card for these automatic payments, you run the risk of going over your credit limit, which can result in late fees, higher interest rates, or even harming your credit.
3. Vacations. Charging a high purchase to your credit card can leave you with huge debt to pay back; a better option is to save up for big bills.
4. Medical bills. Paying medical costs with a credit card will only add extra fees to your total cost, due to interest. Most medical professionals offer payment plans with little to no interest rates.

When You Should Use a Debit Card?

Due to the fact that your debit card is directly linked to your bank account, it should also be taken seriously when deciding when to use it. This can include things like:

1. For everyday, necessary purchases. Avoid overspending by tracking how much you have in your account, and spending it wisely. This can also be a helpful tactic if you are prone to getting carried away with a high credit limit.
2. For withdrawing cash. Use your debit card when taking cash out of your account to avoid extra fees and a high interest rate.

When You Should NOT Use a Debit Card?

1. Gas stations. Fuel pumps are a popular spot for illegal card readers that can steal your bank account information, because they are not manned by employees.
2. Hotels. When scheduling reservations, hotels will place a hold on your payment card. Avoid waiting for fees to be placed back in your account by using a credit card.
3. Car rentals. Some rental car locations will run a credit check on clients who pay with a debit card, which can potentially lower your credit score.

Financial Counseling – FREE for IAM Members

As an IAM Union member, we can connect you with a certified financial counselor to analyze your financial situation, and provide advice. Each session is personalized to your situation. This may include reviewing your budget, conducting a Debt Analysis, analyzing your credit line. 

For those in debt, you may be referred to a Debt Management Program (DMP) to work with your creditors. Our partnership is with The SafeGuard Group, a Nonprofit 501(c)(3) Agency. 

Tap below to fill out a form and get connected with a financial counselor.