Debit vs Credit Cards

The big question, which is better debit or credit? Well, it comes down the individual. Having a debit card and having a credit card both require discipline. Here are some advantages and disadvantages of each.

Debit card-advantages

Your cash

Using your debit card means using your cash. Debit cards typically offer the same rewards as credit cards in terms of earning  rewards points. Debit is a good way to track how you spend your money. Once you purchase an item it is paid for.

Debit card-disadvantages

Can’t build credit

Using debit over credit disables your ability to build credit. I have seen so many situations where people have credit cards and do not use them because they have a misunderstanding of building credit with a credit card. Example: Someone may receive an offer in the mail for a credit card, fill it out, never use it and be under the misconception of possessing a credit card means building credit.

If Lost/Stolen

When using your debit card, if it is lost- you have to wait for your bank to send out another card. The best solution is to have the card delivered to the branch, unless you have someone who can sign for it at your home- otherwise it will be sent back to the headquarters, which leaves you with no card and a long explanation. Having to wait for your card puts you at a disadvantage because you will be unable to access money unless you go to a teller. If your card is stolen, depending on which bank you use will determine whether the money is replaced right away and then an investigation takes places or the investigation takes place first and then the money is replaced. The latter of the two can be very stressful and problematic.


If your debit card becomes demagnetized for some strange reason- this can create an embarrassing situation for you. Example: If you are out at a restaurant or worse if you are grocery shopping and decide to leave your credit card at home- Ouch! The solution sometimes is to gently wipe the magnetic strip, but sometimes that doesn’t work.

Credit card- Advantages

Borrowed money

Using a credit card means you have a month to pay off the full balance. If you are unable to pay off the full balance in a month then you will have to make monthly payments- which means paying more for the purchase than its actual worth. Credit card can serve as an emergency fund as you are trying to build a savings account. Best advantage of a credit card is when you purchase something you know you are going to return.

Build credit

Using credit shows creditors how you like to spend your money. A rule of thumb is to keep your available credit to debt ratio below 33%. Paying off credit cards does not have the positive effect you may think it has because stagnant credit is just as bad as no credit.

If lost/stolen

When using a credit card if your card is lost/stolen, the bank can investigate the situation, deactivate card and it will not have an immediate impact on your credit score if you catch it early. A good rule of thumb is to check your credit card statement at least once a week- Some people like to check it once a month when their statement arrives in the mail or is available online- this gives a thief way too much time to undo your hard work.

Credit card -Disadvantages

Borrowed money

If you are not disciplined when using a credit card, you can find yourself in deep trouble very soon. Many times credit cards having trickling effect on finances. Example: Lets say you have a card with $2,500 limit and you decide you spend $800 on a t.v, then you see the monthly payment is manageable, so you decide to go on vacation and spend $1,000 dollars without realizing it- Now lets say you come back and your car breaks down- now what do you do? You see how easy it is to put yourself in a situation where debt is problematic-you would not have this problem with a debit card.

Increased debt

Using a credit card means increased revolving debt. When revolving debt becomes to high you are likely to have a situation where finances may start to spiral out of control. When you use debit in most situations worst case scenario you may use your credit card as a back up.

Credit vs debit really comes down to the individual. When used properly, it is tandem that can put you in a great financial situation. Be careful, good luck!