The mechanics of credit and debit cards

Debit cards are linked to your bank accounts. When you use your debit card to make a charge, the funds are withdrawn immediately (or within a few days) from your account.

If you try to use your debit card for a purchase that costs more money than you deposited, your bank will usually decline the transaction.

Your credit card, on the other hand, works like a portable, flexible loan. You can borrow money (up to your credit limit), pay it off, and borrow again.

You can repeat this process over and over as long as your account is open and in good standing.

As you use your credit card through a billing cycle, your charges are accounted for on your monthly statement.

It's up to you to pay your entire balance by the due date (highly recommended) or make at least the minimum payment for the amount you owe.

Some people avoid credit cards out of fear of getting into serious financial trouble with credit card debt. This is a valid concern as credit card interest rates are often high and can add up quickly.

You should certainly work to avoid credit card debt, but you can still reap the many rewards of credit cards by practicing responsible credit card use.

Credit cards offer superior protection than debit cards

Putting points and miles aside for a moment just for a moment the best advantage that comes from credit cards is the protection these pieces of plastic (or metal) offer.

First, credit cards protect you from liability for fraudulent transactions. If you lose a card or it's stolen and someone else starts charging it, the federal government will protect you.

Debit cards are also protected from fraudulent transactions thanks to the Electronic Funds Transfer Act (EFTA). However, your liability increases to $500 if you do not detect and report the issue within two business days.

Além disso, o dinheiro em sua conta bancária pode ser bloqueado enquanto o banco investiga a fraude, o que pode ser um problema sério se você tiver contas vencidas nesse meio tempo.

If you paid for the same purchase with a debit card, your bank is not legally obligated to accept or investigate a dispute. The only type of dispute that banks need to investigate under EFTA is fraudulent charges on your debit card.

Credit Cards Help You Build Credit

Credit card issuers generally report accounts to all three major credit bureaus (Equifax, TransUnion and Experian).

As long as you manage your bills wisely (pay them on time and in full each month), credit cards can help you build solid credit scores over time. The older your credit cards become with a positive payment record, the more your credit score will benefit.

You can earn rewards with credit cards

Best of all, I didn't have to spend any extra money to earn these rewards. I used my credit card to pay for purchases I needed to make anyway. While some cards have an annual fee, the benefits almost always outweigh any additional costs.

If I had used the debit card to cover my expenses, I would have missed out on this great benefit. In general, using a debit card for purchases offers nothing in return.

Final result

When you use credit cards responsibly, they are a smarter spending option than a debit card – with the main caveat being avoiding credit card debt.

If you're worried about charging more than you can afford with a credit card, there are convenient ways to track your spending. You can use a money management app, a note on your phone, or even old-fashioned pen and paper to set spending goals and stick to them.

Once you trust yourself to use credit cards responsibly, it's time to put away your debit card and start reaping some rewards.

learn more about the experiences your credit cards can provide.