Debit or Credit- Which Should You Use While Shopping?

Purchasing products, items, and services have never been easier. Who knew we’d eventually be able to buy something using virtual money on a piece of plastic? Since the first credit card was released in the 1950s, they have become the most common and popular way of making purchases. Ever since, there’s been a major debate on whether it’s better to use debit or credit. 

Debit cards are directly tied to your online banking account, while credit cards allow you to make purchases and pay off the charge over time. Which should you use while shopping- debit or credit? There are some key things to know and consider before purchasing something with one or the other.

Understand the Differences 

Debit cards use funds directly tied to a savings or checking account. A debit card is the closest you can get to mimicking a cash transaction. If your account doesn’t have sufficient funds for the purchase, it will either charge your account with fines or decline your card. You enter a pin, and your purchase will go through if approved. 

Credit cards allow you to make purchases that you pay off later. Credit cards connect to a credit card company. You must pay off your balance sooner to maintain a good credit score. The average annual interest rate for credit cards is 16%, and depending on the type of purchase, interest rates may also apply to the item. 

When Debit is the Best Option

Debit cards are the best option if you are trying to budget your money and spending. Debit is also the fastest payment option if the charge needs to be paid immediately. When managing your spending, your debit will be declined if you reach the bottom of your account balance. This motivates you to be more aware and disciplined on when and how often you shop.

Debit is the best option for everyday purchases and smaller charged items and services. One positive to using debit over credit is there are no overdraft fees or interest charges. Once your bank account reaches a zero balance, no more purchases can be made. Stick to debit if you need to break any unhealthy spending habits or are trying to avoid debt, interest, or any additional fees!

When Credit is the Best Option

While credit cards can lead to debt and unwanted and unanticipated fees, there are some circumstances where it can be the better option to use while shopping. Credit card issuers actively check for any fraudulent charges that could be applied when shopping online. They are, in fact, the safest mode of payment. 

Because credit is the safest option, big purchases or ones made while on vacation should be paid using a credit card. Certain credit companies also include perks for hotel, airline, and other travel expenses. The one risk with credit cards is the urgency in paying them off. If you plan to use your credit card somewhat frequently, pay off the expenses added at the end of each month. Doing so will help you to avoid additional fees and interest charges.

Before making any purchase, consider the pros and cons of using debit or credit. You can make the system work for you!