Credit cards and debit cards are essential when it comes to your personal financial structure. Both help make your life easier and give you the power to purchase just about anything on the road, whether you're at home in the United States or traveling to a different country. One thing to keep in mind though is that while both can be beneficial, credit cards and debit cards are different. How do you know when to use a credit card vs debit card?

There are times when you should use a credit card, and there are times you should use a debit card. Knowing this will help protect your financial information while give you the biggest bang for your buck. So before you grab for your wallet next time, here's what you need to know with it comes down to the credit card vs debit card debate.

What Is a Credit Card?

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A credit card is attached to a credit account you have opened with a specific credit provider. There are several credit providers out there, including American Express, Visa and MasterCard. Sometimes these credit providers work through third parties, including Barclays or sometimes stores, like Target or Home Depot. Regardless of who the credit card is through, it is attached to a line of credit.

When you apply for a credit card and are approved, you're granted a line of credit. This is the amount of money you're allowed to borrow against. Imagine, for example, that you have a credit card with a $5,000 credit limit. This means you've been approved for a credit line of $5,000. You can borrow up to that amount of money. Whenever you swipe or use your credit card money is taken away from that line of credit. If you purchase a $1,000 item, you have $4,000 left remaining on the credit card.


When you look at the credit card vs debit card, one of the biggest differences is your interest rate. At the end of every month you have a minimum amount you're required to pay and a pay-in-full option. If you only pay the minimum amount, your credit provider charges you an interest rate on the remaining amount. This is how a credit card company makes money. It has given you a loan. When you don't fully pay off the loan, you end up paying interest on what's left.

It is important to not confuse a credit card with a charge card. Many American Express cards are considered charge cards. This means that while you are granted a line of credit you're required to pay off the full amount at the end of the month. There is no minimum (the minimum is the full amount). American Express charge cards are often harder to get than a standard line of credit because the company expects you to have the financial assets to pay off your entire line of credit in a single month.

Benefits of a Credit Card

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When using your credit card there are several benefits. First, by opening up a line of credit and staying on top of the payments you'll end up building your credit report. This helps if you don't have a credit score, if you're looking to boost your credit score, or if you just want to maintain and strengthen your current report, which helps for later down the line when you want to buy a home or a car.

Beyond building your credit score you're also able to take advantage of many credit card benefits. Most credit card providers now offer benefits, including money back on certain purchases. Credit card companies also provide perks, such as special access to travel services, airport lounge access, the ability to build up airline miles faster and so on. These are benefits you will not receive from a debit card. So, if you're able to handle your line of credit and pay off the line of credit, there is no question with the credit card vs debit card question that a credit card is better for you.

What Is a Debit Card?

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A debit card works like a credit card. You swipe it when making a purchase or you type in your account number to make a purchase. However, the debit card is not connected to a line of credit. It is connected to your checking account. When you make a purchase the money is taken directly out of your checking account. This is not money borrowed: it is your money. This means you do not pay an interest rate fee on purchases you do not pay off. In fact, there is no monthly fee at all. As long as you do not spend more than you have in your checking account, you will not pay a fee on the account at all.

Credit Card vs Debit Card: What to Use and When

It is important to have both a credit card and a debit card. There will be times when you need to make an emergency payment and you do not have the money in your account. However, while you may have both cards, when considering a credit card vs debit card you need to determine when to use each card. There is a time and a place for each and you'll get the biggest bang for your buck by using this list of suggestions.

Building Your Credit Score

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It is important to build your credit score. One of the best ways to do this is with a credit card. You don't need to make major purchases, and you don't need to go into debt to begin building your credit score. You can open up a credit card and make small purchases, like going to the movies or buying gas. As you build your credit score, you'll receive better interest rates for your car loan and your mortgage. In terms of credit card vs debit card you'll be better off going with a credit card here as a debit card will not help build your credit score.


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When it comes to traveling, especially international traveling, you need to use your credit card instead of your debit card. This is more of a liability issue than anything else. Yes, when you travel your credit card might give you special perks and upgrades, and this is one reason to consider a credit card. However, even if you do not have these kinds of perks connected with your credit card, it is better to use credit here in case your card is stolen or to avoid being mugged and forced to withdraw money.

With a debit card there's nothing you can do. If someone steals your card and withdraws all the money, that money is gone. With a credit card, if someone steals your card and starts using it you can freeze the card and explain that the card was stolen. The credit card company has insurance on the card and you'll be able to avoid paying off someone else's unauthorized purchases, which is exactly why you need to use a credit card.

You can still have a debit card on hand so you can withdraw money from a local ATM, as there will be times where you can't use a credit card and will need paper money; but for large expenses, always use a credit card on the go.

Everyday Finances

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Relying on your credit card too much can get you into trouble. It's easy to overspend when you don't see the money. In the blink of an eye, you'll end up spending too much money and will owe more money than you're bringing in, which will increases your debt. With a debit card you're forced to consider how much money you have and whether you'll need that money for a different purchase later in the month. If you're considering your personal finances, the debit card is the best option for you.

It is still important to have a credit card on hand. When looking at a credit card vs debit card you'll discover a credit card is critical if you need an emergency purchase or something comes up where you don't have the needed money in your checking account. So having the credit card is helpful. However, for general purchases, go with your debit card.


When it comes to your personal finances, have both a credit card and a debit card. With that in mind though you'll want consider the credit card vs debit card debate. There is a time and a place for each card, so you need to know when to use each. When you're trying to build your credit score or when you are traveling internationally, it is always best to use a credit card. However, there are times back home when using a debit card costs less money and you're able to avoid expensive interest rates by using your debit card. By following these suggestions you'll avoid negative fees while protecting your finances as you travel. Whatever you do, your best course of action is to have one of each.

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