May 18th, 2012

Debit vs. Credit: When to charge it

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credit vs debit

You’re shopping online. You just found the perfect birthday gift for your significant other, and you’re about to checkout. Now comes the choice: debit or credit?

Do you know when you should use your credit card over your debit card? While it may not seem like it matters, in some cases, you can get specific benefits from using one kind of card over the other. Here’s a quick guide to help you decide which piece of plastic to pull when paying.

For online shopping: Credit cards typically offer better protection against fraudulent charges than debit cards. Due to federal law, your liability on a fraudulent credit card purchase is capped at $50, whereas when it comes to your debit card, your liability depends on how long it takes you to report the fraud. If it takes you longer than two days, you could be liable for up to $500 of the fraudulent charges.

For rewards: If you can control your credit spending, you could greatly benefit from the rewards available on some credit cards. Airline cards like the PenFed Premium Travel Rewards American Express card will get you points to turn in for plane tickets. (American Express is a Credit Karma advertising partner.)

For price protection: If you make a purchase with an eligible MasterCard, you’ll get price protection. If you find the item you purchased at a better price elsewhere during a 60-day window, you’ll be reimbursed for the price difference.

For the warranty: Some credit cards, such as the Capital One Cash Rewards card will automatically double manufacturers’ warranties. The credit card issuer will send a technician to attempt the repair. If no repair is possible, you could be credited for the original purchase price of the item. Keep in mind, however, that cards offering bonuses like extended warranties could come with an annual fee.

For new-account bonuses: While you shouldn’t apply for a new credit card just to get a new account bonus, it can be a great incentive to choose one card over another. Some cards, like Chase Freedom - $100 Bonus, give a cash-back bonus if you spend over a certain dollar amount on your card in the first few months.

For purchase protection: Some credit cards will offer to additional protection over your purchases. If an item is lost or stolen within 90 days of purchase, you’ll be eligible for a replacement or refund.

When to Use Debit

Your credit card may offer better rewards and protection in some cases, but sometimes it’s smarter to choose your debit card. Here are a few scenarios in which you should pick debit:

To control spending: A credit card is a great tool for building credit, but it can also lead to overspending and impulse buying, since you don’t see the immediate deficit in your bank account. If you’re trying to stay on track with your spending, use your debit card.

When you’re paying down debt: If you have credit card debt to pay back, avoid racking up more. Stick to your debit card until your debts are repaid; you’ll only be able to spend the cash you already have.

When you’re on a joint account: When sharing a budget, it could be helpful to pay using your joint bank account. That way, you’ll be able to better track your day-to-day spending.

To teach your kids about budgeting: When your child is making his own money, he’ll likely have a bank account before he gets his own credit card. A debit card can help teach him about budgeting better than cash.

To recover from credit card addiction: If you need to recuperate from relying too heavily on credit cards, leave your cards at home and carry just cash and your debit card. If the temptation to take your cards along is too great, try freezing them—literally—in a block of ice.

Next time you’re unsure whether to choose debit or credit, recall this list to help you make the decision.

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Disclaimer: All information posted to this site was accurate at the time of its initial publication. Efforts have been made to keep the content up to date and accurate. However, Credit Karma does not make any guarantees about the accuracy or completeness of the information provided. For complete details of any products mentioned, visit bank or issuer website.


  1. This is great advice. I think it is also important to note that while your fraud liability is in fact limited with a branded bank debit card, the hassle and potential expense is far greater. Imagine having your entire bank account zapped by a scammer and then having to deal with the fallout while you try to prove the charge was bogus. In the meantime, you probably have checks bouncing, late payments, late fees, and having to do without your money for days or weeks. One other note: if you have a dispute with a merchant, you have some leverage with a credit card; you have little or no recourse when using a debit card.

    Pete at 10:27 am on May 18, 2012
  2. Thanks for the tips, Pete!

    bethy at 10:01 am on May 22, 2012

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