When to Run Credit Cards vs. Debit Cards (2024)

FAQs

When to Run Credit Cards vs. Debit Cards? ›

Credit cards can be especially useful if you need to make a large purchase or face a financial emergency and don't have enough cash available in your checking account. Debit cards, on the other hand, can be helpful for staying within your budget and not spending money you don't have.

If you find yourself struggling to pay off your credit card, using a debit card may be a better way to manage overspending. “If you have credit card debt, then putting routine purchases on a debit card would make sense in order to avoid going deeper into debt.

The 2/3/4 rule: According to this rule, applicants are limited to two new cards in a 30-day period, three new cards in a 12-month period and four new cards in a 24-month period. The six-month or one-year rule: Some issuers may only let borrowers open a new credit card account once every six months or once a year.

Paying your bill in full, on time, every month ensures that you will never pay interest on your purchases. A great way to make sure you never miss a payment is to set up automatic payments from your checking account.

1. Pay off your balance every month. Avoid paying interest on your credit card purchases by paying the full balance each billing cycle. Resist the temptation to spend more than you can pay for any given month, and you'll enjoy the benefits of using a credit card without interest charges.

Credit cards offer the most benefits and protection against fraud, making them the overall best payment option. However, credit isn't for everyone. If you have a track record of overspending, it may be better to stick with a debit card until you can responsibly manage credit.

The idea is to divide your income into three categories, spending 50% on needs, 30% on wants, and 20% on savings. Learn more about the 50/30/20 budget rule and if it's right for you.

Use credit wisely - follow the 20/10 rule

Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items.

Two Credit Cards Every 90 days

If you apply for two credit cards on the same day, data points suggest one of your applications will be put on hold as an automatic fraud prevention mechanism. There are conflicting reports on how charge cards are counted in this two-card limit.

How do smart people use credit cards? ›

Avoid unnecessary spending: Smart credit card users know how to avoid unnecessary spending and use their cards only for purchases they can afford to pay off in full each month.

Credit cards often offer better fraud protection

With a credit card, you're typically responsible for up to $50 of unauthorized transactions or $0 if you report the loss before the credit card is used. You could be liable for much more for unauthorized transactions on your debit card.

There are several common mistakes you can make with credit cards, which can cause financial problems. Making minimum payments only and using cards for everyday purchases are two common mistakes. Avoid using a credit card just for the rewards or points. Try to avoid paying your medical bills with your credit card.

Interest charges. Perhaps the most obvious drawback of using a credit card is paying interest. Credit cards tend to charge high interest rates, which can drag you deeper and deeper in debt if you're not careful. The good news: Interest isn't inevitable.

Debit cards allow you to have the convenience of plastic without the risk of going into debt. Since you are using money from your checking account, you can only spend what you have available, making it a great budgeting tool. Additionally, debit cards offer some level of protection against fraud and theft.

Small Daily Purchases

In these situations, debit cards may be ideal since they typically come with lower merchant fees. Some retailers may even refuse to accept credit cards for purchases under $10, making the debit card the only digital payment method available.

If you can control your spending to within a budget then it is best to use a credit card for everything and then pay it off every month. Most people can't do that so for most people the debit card is better for everyday stuff. If you're the type that will carry a balance on your credit card, use the debit card.

No Debt – With a credit card it's easy to purchase anything you want, even if you don't have the funds. With debit cards, the money comes directly from your bank account, so you avoid spending more money than you have. Plus, you don't have to remember to pay the credit card bill once a month.