Kyle Hilton

Debit cards and credit cards look like similar products, and you can usually use them to do the same thing. But they have crucial differences. Here is a range of situations in which you can use one or the other, as well as which card comes out first.

Round 1: You have a credit card balance.

From a consumer perspective, the main point of a credit card is that you can borrow money to pay for something and not pay any fees or interest – if you pay your balance before the deadline. But keep a balance beyond that date, and the interest rates are incredibly high. (The current national average is about 16%.) So if you have a credit card balance, do everything you can not to let it grow; do this by using a debit card for all in-person and online purchases, so you don’t dig yourself into a deeper hole. “The last thing you want to do is increase your credit card balance,” says Matt Schulz, chief credit analyst at LendingTree.

The winner: Debit

Round 2: You make a big purchase.

Paying with a credit card, whether in person or online, gives you an extra layer of consumer protection that debit cards don’t. If the merchandise you purchased is faulty or you never received it and you are unable to resolve the issue with the merchant, you can appeal to the card issuer to intervene. Credit cards are also more likely to automatically extend warranties on purchases and protect against loss or theft for a limited time.

From a cash flow perspective, using a credit card will give you some time before you need to pay for that purchase, while debit cards will immediately withdraw money from your account. “You could have at least 21 days before you need to pay for the purchase,” says Curtis Arnold, founder of BestPrepaidDebitCards.com.

The winner: Credit

Round 3: You are traveling abroad.

There are two things to focus on: currency conversion fees and transaction fees. Many credit and debit cards charge a 3% conversion fee; for every $100 converted, you are charged $3. Similarly, many banks charge a fee for every foreign exchange transaction, whether at an ATM or at a retailer. But not all of them: Debit cards from Capital One 360 ​​and Charles Schwab are among those that don’t charge foreign exchange fees, although you may have to pay local ATM fees. The message here: It’s less of a credit card and more of a debit card, and more of cards that may or may not charge these fees. “If you’re traveling, bring a primary card and a backup card, and make sure neither of them charges foreign transaction fees,” says Sara Rathner, credit card specialist at the website. of personal finance NerdWallet.

The winner: A draw

Round 4: You want rewards.

While some debit cards offer cash back, including Discover Cash Back Debit, Neon PointCard, and Axos Debit Card, credit card rewards programs tend to be much richer. “And with a credit card, you can choose the kind of rewards you want,” says Howard Dvorkin, president of Debt.com, whether it’s cash, travel points or discounts at a retailer. prefer. Credit cards also often offer additional benefits, including airport lounge access, discounts on purchases, and rental car insurance.

The winner: Credit