Credit Cards vs Debit Cards

woman choosing plastic card

What’s the Difference & Which You Should Use

Your wallet likely includes at least two pieces of plastic to pay for things—a debit card and a credit card. But what’s the difference between the two? How do you know which one to use when?

To begin with, think of it this way: With a credit card, you’re essentially taking a short-term loan to make a purchase, but you’ll have to pay it back. With a debit card you’re pulling money directly from your own bank account. It’s the difference between borrowing money for a small amount of time or spending only what you have.

Think of your debit card like writing a check. You’re spending money from your account for goods or services. If you don’t have enough money in your account, the transaction will be turned down. If you do, money is deducted from your account almost in real time. Debit cards can also be used at ATMs or to get cash back at places like grocery stores. Depending on your spending habits and your unique financial goals, debit cards can be a great way to ensure you only spend money you actually have in your account.

Credit cards, on the other hand, can be perfect for large purchases because it acts like a short-term loan and you have the ability to pay over an amount of time. Credit cards also come with some liability protections, making it safer for online purchases or rentals, and benefits that most debit cards don’t have. These benefits might range from cash back, to points for airline miles or lodging. Benefits can also include extended warranties or rental car insurance.

While both card types offer ways to dispute a transaction, a purchase made with a debit card is drawing funds from your account. This means the funds under dispute may not be available in your account until the issue is resolved. A credit card dispute is generally resolved with the issuer and the merchant, and your funds are not temporarily held.

It’s also quite possible that credit cards that offer rewards will charge you an annual fee, whereas debit cards often come free with an account at your financial institution.

Should You Use Your Credit Card or Debit Card?

Debit cards can be great for people who want to limit spending to only what is in their account. If you have trouble controlling your spending or paying your credit card account bill on time, it can be costly. When you use a debit card, you are only able to spend what you have.

Credit cards generally come with more protections, and responsible use of them can help you build your credit score. Make sure to pay credit card bills on-time each month so your credit score is not negatively impacted.

When making an online purchase, it is recommended you use a credit card.

Credit cards usually come with a variety of consumer benefits that range from protections against fraudulent charges and broken or undelivered goods to things like extended warranties and rental car insurance. With credit cards, you escape some of the financial headaches caused by fraudulent purchases. When disputing credit purchases, the card company will work to resolve the dispute and you won’t be out any money during that process. In addition to after-the-fact protections, credit card companies also have built-in safeguards that can recognize unusual activity on your card and block suspected fraudulent purchases.

Protect Yourself Against Card Fraud

Make sure you are protecting your personal information, account information and your cards against misuse. Remember that your bank will never ask you for card numbers or account information. Some tips to help protect your cards:

  • If you have multiple credit cards, use only one for online purchases. That way, if you need to cancel the card due to fraudulent use you’ll still have another card to use.
  • Consider getting a credit card with a low spending limit for online shopping so someone else cannot run up big purchases.
  • Check your account online regularly to look for suspicious transactions and report them right away.
  • Set up alerts or notifications to inform you of things such as purchases that exceed certain amounts.
  • Make transactions with your card only on trusted, secure sites. Look for ‘https’ at the start of the web address and the small lock symbol in the address bar.
  • Check your account statement against purchase receipts so you can communicate any irregularities as quickly as possible.
  • If your card is lost or stolen, report it immediately.

Bottom line: Your payment method depends on your current (and future) monetary health.

If you have questions about when you should be using debit or credit cards, contact us to talk to a banker. Based on your unique circumstances and overall picture, we can make recommendations to help you reach your goals. No matter what card you use, be sure to take the time to read about your protections and rights as a cardholder. Regularly monitor your accounts and report any discrepancies immediately.

To learn more about the personal banking accounts Fidelity Bank offers, explore our Individual Checking Account options. If you are interested in a credit card, we can help with that, too. Explore our credit cards and complete an online application.


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