Paying with Credit vs. Debit: What’s the Difference?

According to a study in December 2019 by the Federal Reserve, Americans still continue to use debit cards nearly twice as often as credit cards, but the total value of purchases utilizing credit cards exceeded debit cards by nearly 30%. What’s the difference between making payments with a debit card versus payments with a credit card? It depends on what you value most! 

Regular use of credit cards can offer various benefits to cardholders, but let’s look at the benefits when you make purchases with a credit card vs. a debit card.

When you pay with a debit card, you always use cash in your bank account to cover funds. That means you can’t carry a balance—you can’t spend what you don’t have and there’s never interest to pay at the end of the month. This helps some people manage money, especially if they’ve had trouble making regular payments to their credit card or with overspending. 

Utilizing a credit card to pay for the things that you typically buy week-to-week can be a great way to earn rewards and build your credit. Some credit card issuers offer rewards on purchase categories like gas, so if you find yourself purchasing gas on a weekly basis regardless, you can earn rewards on those purchases that will net positive if you pay off your balance before the month is over (hence avoiding paying interest on what you spent). As you demonstrate healthy spending over time with that same credit card, you may start seeing your credit score rise.

Choosing between a debit card and credit card depends on what payment method works best for you. Some prefer the simplicity of a debit card as an added restraint to spending. Others prefer credit cards as a great financial tool that can earn rewards and build credit. If you’re interested in the latter, Fiona will match you with credit cards from top issuers and show you how much you could be earning.