Debit Card vs. Credit Card: Which is Better for Your Needs?

Debit cards and credit cards are small plastic cards used for cashless transactions. They both provide convenience and safety to users who are wary about bringing cash in public or those who frequently shop online.

The big difference

But how are these two financial tools different? The major difference lies in where the cards source the money. When you use a debit card, the money in your savings or checking account gets deducted for your payment. On the other hand, when you purchase something with a credit card, your payment is charged to your line of credit.

To put it simply, credit cards allow you to spend for something by borrowing money that you don’t have yet, while with debit cards, you get to spend only the money that you have in the bank.

When to use a debit card or a credit card

Both cards have their own advantages and disadvantages, so be wise when choosing which one to use for a specific situation. Here are the ways in which one of the cards is better to use than the other:

When a debit card is the better choice:

  • Small purchases – Debit cards have daily spending limits, making them the better option for smaller purchases such as groceries
  • Using cash in the currency of a foreign country – When traveling abroad, you’ll get a better exchange rate on a foreign currency by withdrawing cash from an ATM with your debit card rather than paying with a credit card.

When a credit card is the better choice:

  • Large purchases – Credit cards are ideal for buying expensive items like gadgets, appliances, and other big purchases, as they have their own warranty protection for your purchase on top of the manufacturer’s warranty.
  • Traveling abroad – Credit cards offer a lot of discounts and promos for frequent travelers. You can also benefit from the fraud protection that comes with a credit card. So if you lose your card or have used a shady ATM, you can have your card blocked right away.

Which of the two cards do you use more often and why? Let us know in the comments below!