With value-added benefits such as rewards and cash back, it’s common for most people to reach for their credit cards when it comes to in-store and online purchases. After all, why not make your money work a little harder for you? What’s more is that it’s much easier to fight fraudulent charges made on credit cards than it is on debit cards. For these reasons, some financial experts just suggest charging every purchase you make – so long as you’re certain you can pay off your card each month and avoid carrying over a balance.
However, there are still times when paying for a purchase with your debit card makes sense. So when should you reach for your debit card instead of your credit card? Here’s a look at some scenarios:
You Need Cash
One of the nice things about debit cards is that you can also get cash back on the purchases you make. Whether you have a cash-only purchase that you have to account for or just like having some petty cash on hand, this is one often overlooked benefit. Yes, you can take out a cash advance on your credit card, but you’re likely to be charged interest on it. And a trip to the bank to make a withdrawal is another option, but often not as convenient as cash back when making a purchase.
To Avoid Merchant Fees
Some retailers and businesses will charge a credit card processing fee on purchases to make up for the percentage of the purchase that they have to pay to the credit card companies. Most of the time, however, debit cards are not subject to this surcharge. That said, it can make sense to opt for the debit card rather than pay an extra 3 percent on a purchase that’s only going to net you 1 percent or so cash back.
To Better Manage Spending
This is perhaps the biggest reason why consumers should roll with a debit card rather than a credit card. It’s like the example we gave above – it’s only really worth it to charge everything if you know you’ll be able to pay your credit card off each month and won’t be subject to paying interest on carryover balances. Debit cards, on the other hand, ensure that you’re only spending what you have. If you’re only making the minimum payment on your credit card bill, you’re going to be paying a lot more long-term for said purchases.
You Have a Debit Card with Good Rewards
Finally, debit cards can come with rewards options too. While they don’t tend to be as lucrative as credit card rewards, it is a way to make your money work a little harder for you – especially if you want to manage your money more responsibly and don’t want to risk hefty interest fees on carryover credit card balances. Shop banks a little and see what your options are for cash back rewards debit cards. These cards are also ideal for consumers who are looking to improve their credit score and don’t want to incur more debt.