Credit vs. Debit: What’s the smarter swipe?

Credit and Debit cards may look a lot alike and are taken almost anywhere, but their uses and features are very different. Which should I use on groceries? Which should I use online? In order to make responsible financial decisions, we first need to know the difference.

What is a Credit Card?

• Credit cards allow you to borrow money from the credit card company when you make a purchase. You can pay it all back at the end of the month and no interest will be charged or you can make monthly payments with interest.
• Responsible use of credit cards is one of the most effective ways to build a good credit record.
• They provide a source of money in case of an emergency.
• If fraud occurs on your credit card, your liability for unauthorized use tops out at $50.
• Credit cards are good to use for all on-line purchases.

What is a Debit Card?

• Debit cards draw money directly from your checking account when you make a purchase.
• Using a debit card doesn’t reflect on your credit report at all.
• If you have an emergency and needed cash and there wasn’t any in your account, you couldn’t get any.
• If fraud occurs on your debit card, you’re liability could be anywhere from $50 (if fraud is reported within two days) all the way up to $500 if reported within 60 days. After the 60 days you could be liable for the full amount.
• Debt cards are good for in-store purchases.

Both have their own benefits as long as they are used responsibly. Myself I use both, debit cards for cash back purchases at local stores and my credit cards for online purchases for the security and rewards. They’re both smart swipes, it just depends on your spending habits.