Debit vs Credit Cards Determining What’s better

First, let’s start by quickly summarising the difference between a debit card and a credit card.

A debit card is linked to your current/check account. When you purchase items with it (either in a store or online), money is taken (debited) from your current account balance. This means that you can only make the purchase if you have enough funds in your bank account at the time of purchase.

With credit cards, you ‘buy now, pay later’. The main benefit therefore is that it will enable you to make a purchase even where you don’t currently have sufficient funds in your bank account. The downside is that you will pay interest on the amount that you have borrowed.

The answer to this depends on one fundamental question: Do you (at the time of purchase) have sufficient funds in your bank account to comfortably make the payment?

If the answer is ‘yes’, then use your debit card. It will be cheaper as you won’t pay interest as you would with a credit card. Note: Some retailers also charge a small fee for credit card payments, which is another reason why debit cards are a cheaper payment mechanism.

If the answer is ‘no’, then you would be better to use your credit card. However, I’d suggest that you need to be confident that you are going to be able to repay the credit card debt at the earliest opportunity. The danger with credit cards is where people only pay off the minimum amount every month and end up paying interest on interest.

Note: I used the word ‘comfortably’ when asking the question about whether you have sufficient funds to pay by debit card. The reason I did was because you need to consider whether another transaction (i.e. a regular direct debit) might subsequently cause you to exceed your agreed overdraft limit …. which could trigger bank charges.