Will That Be Debit, Credit or Cash?

Many consumers make the switch from cash to debit and credit cards, and for good reason. First of all, payment cards are a much safer option than carrying around large sums of cash.

Credit and debit cards also offer convenience and flexibility. You can make purchases, rent a car, and reserve a hotel room, to name just a few benefits. Payment cards also allow you to track your purchases online, which can help with budgeting.

But how do you know when to use your debit card and when to use your credit card?

When debit is in demand

The best part about debit cards (also called ATM cards) is that you're spending money you actually have. Say, for example, you've had your eye on a new pair of jeans. Rather than charge your purchase to your credit card and face a future bill, you can have the money debited immediately from your bank account. It means having the same buying power as cash, without having to find a branch or ATM to withdraw the money from and carry your money around.

Debit cards are also a good fit if you're carrying debt. That's because they limit your purchases to what you can afford at that moment, preventing you from spending beyond your means.

When credit makes sense

Convenient, easy to use and widely accepted, credit cards pack a whole lot of purchasing power into a paper-thin slice of plastic. No wonder so many of us reach for our credit cards when purchasing items ranging from clothing to cars. And, unlike debit cards that often carry a maximum daily spending limit, credit cards are perfect for purchasing larger items.

Many credit cards also offer rewards such as airline miles or cash back in exchange for choosing credit. They can also provide consumer protection. Make a purchase with a debit card and, chances are, you're stuck with what you've bought. However, with a credit card, you have the option of withholding payment if a purchase doesn't meet your satisfaction. Many credit cards even limit your liability for fraudulent use if your credit card is lost or stolen.

The trick to making the most of a credit card is finding one that fits your lifestyle. For example, if you're paying an annual fee for a card that offers travel miles and you're not a world traveller, it may be a good idea to switch to a lower fee card.

Use our MasterCard^® or Visa Benefits^® Comparison Chart to compare different credit card products and determine which program is right for you.

Make sure you use your cards properly and responsibly so you benefit from all their advantages. Read Smart Use of Credit to learn more.