26 Jul 2021

Debit Cards Vs. Credit Cards – Which Are Better?

Is it better to use a debit card or a credit card?

People often ask us that at Boost Credit 101, though the ultimate answer depends on what benefits or features are most important to you.

Let’s dive in and explore the differences between the two so you can figure out the best choice for your needs.

How Do Debit and Credit Cards Work?

A debit card is linked to a checking account. Whenever a consumer uses a debit card to pay for something, the money is withdrawn directly from your bank. With a credit card, your money isn’t withdrawn immediately, as you’re borrowing money from someone else to pay for your item on credit. The person that you are borrowing from is your lender. The agreement that you make is to pay back that money at a later date with potential interest.
A credit card is a revolving credit account, meaning you can carry the balance from month to month and make the minimum payment each time.

Debit Cards Vs. Credit Cards - Which Are Better?
Debit Cards Vs. Credit Cards – Which Are Better?

Fraud Protection

When someone fraudulently uses your debit card, they withdraw money from your bank immediately, which is why money stolen from debit cards is often hard to get back. With credit card fraud, on the other hand, the money is stolen from the bank. The bank typically has good fraud protection in place.
In the event of credit card fraud, you can only be liable for $50 maximum according to the Fair Credit Billing Act. All of the major credit card networks provide $0 fraud liability policies as well, meaning you don’t have to pay if someone uses your credit card without you knowing.

Spending Power

You can only spend what you have access to in your account with a debit card. While you might have a lot of money in your checking account, it is typically better to keep it elsewhere so it can go to work for you vs the bank (think investments here).

On the other hand, credit cards provide consumers with more buying power, as credit cards only have a credit limit that the lender sets. If you have a good credit score, that credit limit could be fairly generous. Because it isn’t necessary to pay off the balance right away, you don’t have to
maintain a large amount of cash in your account at all times.


Credit Building

Credit cards can help build your credit history and debit cards cannot. Plain and simple. Of course, if you aren’t careful with a credit card, it can do a lot more damage to your financial status than good. To avoid negative credit, you must be smart with your credit cards.

When it comes to the debate between credit and debit cards, both have their own pros and cons.

When it comes to building your credit, you always have the choice to purchase authorized user tradelines too. Get in touch with us here at Boost Credit 101 to learn more about authorized user tradelines as a potential benefit to your credit score.