Debit vs. Credit: Which one should you use?

Posted at 10:21 AM, Jul 12, 2019
and last updated 2019-07-12 12:03:43-04

It’s a question we get asked several times a week – debit or credit?

We all have an option we prefer, but are you using the right one for your personal financial situation?

Credit cards are a way of life for Britt Hyatt and her business in branding and website design.

“Credit card has helped us to be able to make those, you know, those bigger leaps, those bigger risks, and just feel more comfortable in doing so that we can have a little bit more time to pay it of,” Hyatt, of Willoughby, said.

That’s the key difference between credit and debit cards.

“A debit is a transaction that automatically gets deducted from a bank account. A credit is something that another institution is paying on your behalf and within 30 days that amount is owed,” Vincent Gaudio, a CPA, said.

But when it comes to which method you choose, Gaudio says there are no right or wrong answers.

However, there are pros and cons to each one.

For Hyatt, building her credit score was a big priority.

That’s something you can’t do with a debit card.

“At the time, I didn't really have much to do with my credit score or anything like that. And I knew it was important if I wanted to, you know, make a house purchase or anything like that,” Hyatt said.

Many credit cards also have rewards, like cash back options or ones that help you earn and redeem points on travel.

But most importantly, they have an extra layer of protection if it gets hacked.

“Monitor your transactions, keep the receipt when the statement comes in, you match that up, immediately contact the credit card company, and they will handle it accordingly,” Gaudio said.

Debit cards can get hacked too and because they’re connected to your bank account thieves can get away with your hard-earned cash, but they’re not all bad.

“Something that I really did like about debit is it kind of kept me in check. I wanted to make sure I knew what was going out what was coming in,” Hyatt said.

And credit cards have a dark side too.

“You may not see how that grows so quick. And at 18-21% interest, if you don’t pay that within 30 days you could be surprised at what that balance could be,” Gaudio said.

Gaudio says monitoring your accounts is key and spending within your means.

“I didn't have a credit card until I had a stable job, until I knew the income that was consistently coming in,” Hyatt said.