Credit card or debit card: my payment dilemma
I don't know about you, but I am often in a shopping dilemma—do I use my credit card to buy this, or do I use my debit card? Do I want to pay for this over time (plus interest), or do I have the money in my checking account to cover the cost of what I am buying? Both cards are such an easy, convenient way to shop without having to carry any cash. So I try and keep these simple points in mind:
- Use my credit card—essentially I am borrowing money I have to pay back!
- Use my debit card—the funds come right out of my checking account, so do I have the money in my checking account to cover this purchase?
I find that I do need to use both cards—each has a benefit for me:
- Credit card—when I use within my spending limit and pay on time, it helps me build a solid credit rating. So very important!!
- Debit card—since I know I have a limited amount in my checking account, it helps me stick to my monthly budget. It is so nice not to have monthly credit card bills in my mailbox!!
Compare the two payment types for yourself:
| CREDIT CARD | DEBIT CARD / CHECK CARD |
| You get a bill at the end of the month for the money you owe. | Money is deducted immediately from your checking account. |
| Enables you to buy things today instead of waiting and saving. But remember: You'll have to pay the money back with interest. | You can only buy what you can afford with the cash in your checking account, so you may have to wait and save to make a purchase. |
| If you consistently pay your bills on time and in full each month, you'll build a good credit history and good credit score. | If you don't overdraw, you'll strengthen your reputation with the bank as a good customer. |
How do you determine when you are going to use your credit card or debit card?
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Contact Pam
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Comments (3)
Found in Financial education, Parents, Paying, Preparing, Student loans, Wells Fargo Bank
Comments
I never use a debit card because I prefer the legal protections available with credit cards. I pay my balance weekly as I like to keep up and don't like borrowing money.
Posted by: David | November 25, 2006 12:25 PM
I dont have much in my visa debit card right now. Does that mean I can go and make a purchase using credit and pay back the money later?
Posted by: Jessica | September 2, 2008 08:48 PM
@ Jessica - for me a couple things play into whether or not I use credit when my checking balance is low (remember that's where the money comes from when you use a debit card). First off, I have to remember that I will have to pay that money back with interest. If I'm close to getting a paycheck it might be ok, but if you don't have income coming in to cover the expense then it might not be the best decision. I also have to think about whether or not it's an item I really need. For example, I wouldn't charge a new pair of shoes, but I might charge gas for my vehicle. Make sense?
Posted by: Barbara Raus | September 9, 2008 03:30 PM