Debit vs. Credit: Which Card Should You Use?

Knowing when to use which card can help you reap their financial benefits.

Photo by Daly and Newton/Getty Images

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“Debit or Credit?”

You hear it from every cashier, but as with most things, there’s no one right answer. For some of us, in certain situations, credit might be better. For other people, in other situations, it might be debit.

So how are you supposed to know which option is right for you—and when? We’ll help you figure it out.

Use a credit card if . . .

1. You’re Trying to Build Credit

The better your FICO credit score, the better your odds of getting a favorable interest rate on a future mortgage, car loan or other line of credit. And a big part of achieving a stellar credit score comes down to building a proper credit history.

“In order to qualify for a FICO score, you need to have some credit history that will allow the algorithm to assess the likelihood that you’ll repay various credit obligations over time,” says Frederic Huynh of FICO, the company that developed the popular credit scoring system. “Using a credit card as a means of repayment is one way to build up that history.”

Worried that you’ll overspend? According to Huynh, just using your credit card to buy something small each month, like a pack of gum—and then paying off that charge without delay—is enough to build a strong credit history.

2. You Want to Accrue Rewards

Although some debit cards do offer rewards, the perks offered through credit cards tend to be more enticing. “In general, debit cards aren’t so lucrative for banks, whereas the credit card market is hot right now, so there are bonuses and benefits,” explains Brian Kelly, who runs credit blog The Points Guy.

A debit card rewards program, for instance, might offer you small, spending-based contributions to your checking account for a short period of time—but credit card rewards may give you up to 3% cash back on certain types of purchases without a time limit.

3. You’re an Avid Traveler

While there are plenty of credit cards that reward travel through airline miles or points toward free hotel stays, debit cards centered around travel are few and far between. If you travel a ton and rank airline miles right up there with cash, it might pay to opt for a credit card that can grant you miles by the bucketful.

Some programs offer a mile for every dollar spent, while other cards offer 1.5 or even 2 miles per dollar. And that’s not to mention sign-up bonuses, which can grant you tens of thousands of miles early on if you put a certain amount on the card in the first few months. Plus, many credit cards offer other travel perks, such as car rental insurance (as long as you paid for the rental with your card), emergency assistance and even a 24-hour phone concierge service.

4. You Want Purchase Protection

Some credit cards offer purchase protection if an item that you buy with that card gets stolen or damaged–and that protection often covers you up to 90 days from the purchase date and for up to $500 in damages. Other cards will extend your manufacturer or retailer’s warranty. And a few cards offer price protection: They’ll reimburse the difference if you find the same item on sale elsewhere for less within a certain timeframe after you buy it. Some credit cards even offer return protection—the credit card company will reimburse you (within predetermined time and price limits) if you try to return something and the retailer won’t take the item back.