Still Using Debit for Everything? Here’s Where It Can Backfire

Using a debit card for every purchase, lets you avoid debt and interest, annual fees and credit checks. But never using a credit card can backfire.

Credit cards help you build credit and typically come with better fraud protection and rewards than debit cards. Here’s what you need to know, and why you may want to consider opening a credit card.

Debit cards have fewer protections

Debit cards immediately pull funds from your checking account when you make a purchase. That works for legitimate purchases, but it can quickly become a problem for fraud, merchant disputes and temporary holds. Any missing money from illegitimate purchases can affect your ability to cover essential expenses and risk you triggering overdraft fees.

There are federal protections for debit cards, but credit cards tend to offer even more protections. When you swipe your credit card, the money isn’t actually being pulled from your checking account, which can help you avoid bounced checks and missed bills.

Most credit cards also come with $0 liability policies for unauthorized charges so you don’t have to pay anything if fraud occurs.

Debit is often weaker for rewards

The decision between a debit card and a credit card isn’t just about purchase protections and having more flexibility with the funds in your checking account. Credit cards also offer much better rewards, such as cashback on purchases, travel rewards, sign-up bonuses and other various perks.

While you shouldn’t spend money just to maximize your rewards, these reward programs often let you save on travel, subscriptions, gas and more. But if you don’t pay your balance in full each month, the high annual percentage yields (APRs) can negate the benefits of reward programs.

You can compare some of the best credit cards to get started. It’s best to assess cards based on how you spend money and what perks you would use the most.

When debit still makes sense

Debit cards can help people avoid debt and overspending and establish good money habits. A debit card can also make sense for someone who makes a lot of ATM withdrawals and small in-person purchases.

However, you will likely get more mileage from credit cards for large purchases, and they can be safer for online purchases. Credit cards can also be more convenient for recurring subscriptions since you don’t run the risk of overdrawing your account.

If you use a debit card, make sure you set up account alerts so you know when your balance is getting low. You should also have a cash buffer in your checking account so you don’t have to stress about whether you have enough funds to complete a given purchase. As with any account, make sure you use strong passwords and report suspicious activity quickly.

You don’t have to completely replace your debit card with a credit card. Knowing their strengths and weaknesses can help you determine which one is right for you, and when it makes sense to use one over the other.