Credit · February 03, 2022

When to Use Debit Versus Credit Cards

Sean Sanchez

Managing Senior Product Manager

Dave Moon

Senior Manager, Card Strategy

Debit and credit cards look very similar when they're sitting side by side in your wallet. But despite appearances, these two cards work quite differently. Understanding the benefits of each one can help you decide when to use debit versus credit.

Debit cards: Spending money you have

Using a debit card is an easy way to make purchases with the money you have in your checking account. This can make it easier to budget because you know that money is spoken for as soon as you make a purchase. You can pay with the card at a store's checkout counter or online, or you can add the card to your digital wallet and pay with your smartphone. You can register your card with billers and set up automatic monthly payments. You can also use a debit card to withdraw cash through an ATM or get cash from your account when you buy at a retailer.

Debit cards come with robust security features so you can feel confident your transactions are safe. One of these features is the PIN, a number you enter when using the card that acts like a password. There also are fraud protections so that you aren't liable for purchases if someone steals your card information. Plus, you can sign up to receive alerts so you're notified whenever the card is used and if anyone logs into your account.

Debit cards may come with other benefits, too. For example, you might get discounts or promotions with certain retailers when you use your debit card.

Credit cards: Accessing a credit line

With a credit card, you can borrow up to a certain limit. You can use a credit card to pay at a card terminal, online or through a smartphone. You'll need to make at least a minimum payment on your balance each month. Many credit cards have a grace period so that if you pay your statement in full by the due date, you don't have to pay interest. However, you'll owe interest if you don't pay your balance in full each month. This means you'll have to budget more carefully not only so that you don't overspend, but also so you can minimize the interest you pay each month.

You're protected against fraud when you use a credit card, so you aren't liable if someone steals your card. And because it isn't linked to your checking account, a stolen credit card doesn't put your funds at risk. For extra peace of mind, you can sign up for alerts regarding transactions or any time your account is accessed or changed. Plus, you can receive notifications to show your balance and remind yourself when your bill is due, making it easier for you to stay on track.

In addition to making payments, you can use a credit card to get a cash advance or transfer a balance from another card. Many companies offer credit card rewards that may give you cash back, statement credit, travel miles, products or experiences in return for using your card.

When to use debit versus credit

Both credit cards and debit cards are great payment options, and which one you use depends primarily on your needs, goals and preferences. There's no need to use one exclusively over the other. You might be more comfortable with one and choose to pay with it most of the time, or you might want to switch between the two types of cards.

Use a credit card

There are a few situations where credit makes more sense than debit. For example, you might prefer credit when:

  • You're traveling. Many credit cards come with travel protections like insurance that covers stolen phones, flight delays or other situations that can arise on a trip, such as losing a suitcase in a rideshare. Some cards give you a waiver so you don't have to pay for insurance when you rent a car. And because a credit card isn't linked to your bank account, you don't have to worry that anyone could access your account if the card is lost or stolen on your journey.
  • You want to maximize rewards. Many credit cards offer rewards like cash back, gift cards or airline miles. You might even be able to donate rewards points to your favorite charity.
  • You want to build credit. Making on-time payments on your credit card builds your credit history and shows lenders that you can use credit responsibly.
  • You want to pay for a purchase over several months. With a credit card, you can make a big purchase now, then make payments over time until it's paid off. Just remember, if your statement isn't paid in full, you'll be responsible for interest payments on the remaining balance.

Use a debit card

On the other hand, a debit card might be the better choice when:

  • You want to use existing funds in your account. A debit card lets you directly access funds in your checking account, which you can't do with a credit card. If you've previously had trouble managing credit, debit may offer you some peace of mind and help you avoid overspending.
  • You want to save on interest and fees. You don't owe interest when you use a debit card, and there typically isn't an annual fee. You also don't incur some of the fees a credit card might charge, like fees for late payments.
  • You want to make budgeting easier. A debit card is connected to your checking account, so not only is it harder to spend more than the money you have on hand, but it's also easier to track what you do spend. Debit charges will show up quickly on your checking account statement, so you won't have to worry about keeping an eye on multiple account or card balances to know where you stand.
  • You want to keep your credit utilization low. It's recommended that people use no more than approximately 30% of their available credit, noting that borrowing more can hurt your credit score. If your credit utilization is at or above 30%, it might be a good idea to use debit while you work on paying off your debt.

Ultimately, there's no one-size-fits-all mix of credit and debit usage—the way you use each should be individual to you. In fact, the best approach will likely change over time as your needs and goals shift. You can talk to a bank representative to learn more about debit cards and credit cards, and see if one or both is right for you.


A few financial insights for your life

No results found

This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.

Links to third-party websites may have a privacy policy different from First Citizens Bank and may provide less security than this website. First Citizens Bank and its affiliates are not responsible for the products, services and content on any third-party website.