4 Times Choosing a Credit Card Over a Debit Card Can Pay Off

A man looks up as he holds a credit card with a computer near him.
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Credit card debt is scary. It’s given credit cards themselves a negative reputation. Putting almost everything on your credit card is dangerous, right?

But the truth is credit cards offer a lot of perks — if you use them responsibly and pay your balance off each month.

You can earn cash back, build a good credit score and benefit from more robust fraud and theft protections.

“Just don’t be stupid with your spending,” said Ryan Greiser, a certified financial planner and founder of Opulus in Doylestown, Pennsylvania.

Only make purchases with your credit card when you have enough money in your checking account to cover them so you don’t overspend.

“If you can’t afford it, don’t buy it,” Greiser said. “It’s that simple.”

4 Reasons Why You Might Want to Use Your Credit Card Like a Debit Card

Using your credit card like a debit card is only a good idea if you can responsibly manage your spending. Otherwise, your credit card balance becomes a burden instead of a financial tool.

Here are four reasons to use your credit card for everyday purchases.

1. Max Out Rewards

Banks rarely, if ever, reward you for using a debit card. You’re basically using an electronic check to pay for things.

Credit card companies, on the other hand, compete for your business with a slew of incentives, from cash back and airline miles to luxury upgrades and cell phone insurance.

It makes more sense to get rewarded when you buy something instead of walking away empty handed.

If you’re earning 1% to 5% cash back on every purchase, you can often use this money to pay off a portion of your credit card bill. Or, in many cases, you could transfer the cash directly to your bank account — even your credit card — or redeem the money for gift cards.

Credit card sign-up bonuses also require you to spend a certain amount of money within a specific time to get the reward. For example, you might need to spend $2,000 in the three months to get a $200 welcome bonus.

Putting everyday purchases on your credit card makes it easier to hit that bonus.

Still, it takes discipline to earn rewards without incurring debt.

“Playing the points game with credit cards can work, but only if you pay them off completely each month and are willing to do the work,” said Jay Zigmont, a certified financial planner and founder of Childfree Wealth.

Remember: You should only use your credit card for purchases you would’ve made anyway. Don’t spend money just to earn rewards.

“If you’re spending money to get the points, you’ve lost the points game,” Zigmont said.

A good tip is to log into your credit card account a couple times a week and pay off your balance.

“This way your bank account balance better reflects how much you still have to spend,” said Jordan Nietzel, a certified financial planner and founder at Trek Wealth Planning.

2. Build Good Credit

Credit cards can also help you establish a positive credit history or rebuild your credit when you use your cards responsibly.

Using your credit card regularly and paying it off in full each month shows that you are a trustworthy borrower.

When you pay your credit card bill every single month, the credit card issuer is more likely to increase your credit limit over time. While you never want to hit your limit, having a higher limit can boost your credit score.

Your credit utilization ratio is how much of your available credit you’re using, and it should be 30% or less. Getting a higher credit limit while keeping your balances low will decrease your credit utilization ratio — and that’s good for your credit score.

3. Fraud and Theft Protection

Credit cards are more secure than debit cards. That’s why some experts recommend using them over debit cards for online purchases.

“With the proliferation of online scams, and suspect card readers at gas stations, it’s smart to use a credit card with fraud protection,” said Jack Arnold, a certified financial planner at AVID Planning in St. Petersburg, Florida.

Plus, if there is a fraudulent charge made on your account, credit cards offer a buffer. A criminal can’t drain the cash in your checking account — money you might need to pay rent or cover an automatic withdrawal for your phone bill.

“Let a credit card company take on that risk,” Arnold said.

On the other hand, if someone steals your debit card, it could take a while before the bank corrects your balance after you report the card stolen. You can also be held liable for up to $500 of the loss rather than the $50 max for credit cards.

Many credit card companies will immediately notify you when suspicious charges appear on your account and help freeze your card.

Banks can also help restore your account if your debit card is stolen, “but it’s much more difficult, takes longer and is not guaranteed,” Arnold said.

4. Easier to Use When You Travel

Some businesses — particularly hotels and car rental companies —- require you to pay using a credit card. If they accept cash or a debit card, you’ll be forced to put down more money as a deposit, which can equal a hold of several hundred dollars on your account.

Some credit cards also offer $0 foreign transaction fees, which can save you money when you swipe abroad.

When Is It Better to Use A Debit Card?

Cash is still king, sometimes. Keeping your debit card vs. your credit card handy makes sense in a few situations.

  • You’ll pay a fee for using a credit card. Some utilities and property management companies charge a convenience fee if you autopay your bill with a credit card. These fees can range from $2 to $5, or a percentage of your total. If it costs money to use a credit card, go with a debit card or use your checking account.
  • The store doesn’t accept credit cards. Some small merchants — even large ones, like WinCo — don’t accept certain credit cards or might not accept credit cards at all. Keeping your debit card in your wallet is a good idea if you end up at a cash-only event or establishment.
  • You’re tempted to overspend. If you know you tend to have trouble with overspending, it might be wise to shy away from credit card use.

4 Tips for Using Your Credit Card Like a Debit Card

Ready to reap the benefits of perks and cash back without the burden of credit card debt? That’s a win-win. Here are some tips to use your credit card like a debit card.

1. Don’t Buy Things You Can’t Afford

If you use your credit card for everyday purchases, only purchase things you would have bought using your debit card anyway. In other words, if you don’t have the money in your checking account to cover your upcoming credit card purchase, don’t buy it.

2. Use a Budgeting App to Monitor Your Cash Flow

You’ll need to keep tabs on how much money is coming in and going out of your accounts if you want to avoid debt.

There are lots of great budgeting apps out there, including Mint, Rocket Money and YNAB that can help you monitor your finances.

3. Pay Your Credit Card Off More Than Once a Month

This way, your checking account will reflect your recent spending, and your credit card balance won’t balloon into a nasty bill at the end of the month.

4. Keep It Simple With One or Two Credit Cards

It’s easy to lose track of your balances if you have too many credit cards in heavy rotation. It will also take longer to accumulate points if you spread your spending over multiple credit cards.

Rachel Christian is a Certified Educator in Personal Finance and a senior writer for The Penny Hoarder. She focuses on retirement, investing, taxes and credit cards.