Which one deserves your swipe?

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Whether you should use a credit card or debit card depends on your preferences and spending habits. Credit cards are a better option in most situations because they have purchase protection, offer rewards, and can help you build credit.

But that doesn’t mean your debit card is useless. Here are some key differences between debit cards and credit cards and when it makes sense to use each.

What’s the difference between credit cards and debit cards? 

Credit cards and debit cards may look similar, but they work in very different ways. When you pay with a debit card, the money comes out of your bank account. 

With a credit card, you’re borrowing money from an issuer with the promise of paying it back later. If you can’t pay back the balance in by the end of the month, you’ll have to pay interest. 

How credit cards work

Credit cards are a convenient and secure way to make purchases. Your card comes with a credit line, which is the most you can spend on your card. The amount you owe at any given time on your card is your credit card balance.

If you don’t pay your entire balance by the due date, you’ll be charged interest on the unpaid amount. Using your card responsibly can help you avoid interest charges and take advantage of rewards and other perks.

How debit cards work

Unlike credit cards, you typically won’t have to apply for a debit card — it automatically comes with most checking accounts.

Your debit card connects to your bank, typically withdrawing money directly from your checking account when you buy something. It’s difficult to overspend because debit cards only use the money you have.

Debit cards won’t charge interest but typically won’t offer the consumer protections or rewards that credit cards do.

Can you build credit with a debit card?

You typically can’t build credit with a debit card.

“Your credit history and credit score are used by lenders to predict the likelihood that you’ll repay a loan,” says Jason Steele, credit card expert and founder of CardCon Expo. “Since a debit card doesn’t constitute a loan, the account won’t appear on your credit report, and its use won’t help, or hurt, your credit.”

A good credit score helps you to borrow money at more favorable interest rates, qualify for certain loans, and get better insurance rates. Credit cards are one of the most common ways to establish and build a credit score.

Are credit cards safer than debit cards?

Credit cards generally offer more protection and security than debit cards.

“Credit cards are regulated by the Fair Credit Billing Act, which shields cardholders of the responsibility for paying for inaccurate or fraudulent charges,” Steele says. “Debit card transactions have some protections but aren’t covered by this law.”

If your debit card is lost or stolen, you may be on the hook for any unapproved charges, depending on when you report the card lost:

• Within two business days: $50

• More than two business days but within 60 days: $500

• Over 60 days: No limit

Today’s top credit cards offer liability protection, so you’re not responsible for any fraud charges on your card. Some cards include additional consumer protections, like travel insurance or cell phone coverage.

Credit cards can’t, however, protect you from yourself. With a card, you risk spending too much, paying high interest costs and fees, and getting into debt. You can avoid this with responsible credit card use, including paying your balance off each month.

Because debit cards can’t incur debt, they may be safer for those worried about using a credit card.

Should I use a credit card or debit card?

You’re usually better off using a credit card for most purchases. Credit cards have clear advantages over debit cards and allow you to build credit, which can improve your financial health.

“There really is no situation where one should use a debit card over a credit card unless there is a fee to do so,” says Bryce Conway, founder of 10xTravel.com, a website helping travelers maximize their credit card rewards. “Debit cards do not earn rewards, come with little to no protections, have no flexibility as to payment timing.”

Situations when you may want to use a credit card include:

• When you want to build credit

• When you want to earn credit card rewards

• When you want purchase protection

• When you want to finance a purchase over time

Situations you may want to use a debit card include:

• When you want to stay on budget and control your spending

• When you don’t want to risk paying interest or incurring debt

• When you need to withdraw cash

• When you want to avoid merchant fees

Ultimately, it’s up to you and your preferences. If you want the security and rewards a credit card offers, pay with a credit card. If you don’t want to risk paying interest or missing a payment, pay with a debit card.

If you’re new to using credit, you may want to consider a credit card geared for beginners, which can help you practice building smart money habits. Here are some options for starter credit cards.

Opinions expressed are author’s alone, not those of any bank, credit card issuer, or other entity. This content has not been reviewed, approved, or otherwise endorsed by any of the entities included in the post.

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