Wallet roulette: When to use credit cards vs debit cards

If you've ever paused before paying a cashier or clicking the “pay now” button, wondering which payment method to use, you're not alone.

The trick is to understand the features your payment options and deciding which works best for your needs.

With some background knowledge, you can pick the best tools to maximize your spending power, stick to your budget, and remain focused on your savings goals.

Debit cards: Reliable and safe

Debit is the most popular payment method for a reason: It gives you safe, instant access to the money that's already in your checking account. Most debit cards are free and included with your checking account, so you don't have to apply for one, undergo a credit history check, or pay an annual fee. All you have to do is activate your card and it's ready to go. Better still, you'll never have monthly bills, late fees, or accruing credit card interest charges.

Using debit means you're directly drawing from your bank account's available funds, which is a boon for people trying to budget and build up savings.

Not only are you spending within your means, but you can track that spending in real time so there aren’t any surprises at the end of the month. Because the impact on your account balance is instantaneous, you’re less likely to incur overdraft fees or carry a debt balance forward.

Because debit cards are accepted widely and internationally, they're a direct means of accessing your cash without having to physically carry bills in your wallet.

Your debit card can be linked to a mobile wallet application like Zelle® to give you even more flexibility of use. You can also use your card to withdraw funds at just about any point of sale.

Credit cards: Purchasing power

Credit cards give you an extra boost when your cash reserves are low. Yet with this power comes greater personal finance responsibility.

Credit cards come in handy for making large purchases that you want to pay off over time. For instance, if you need to buy an airline ticket but you don't have sufficient funds to cover the cost until you get paid, you might want to use your credit card.

Another time to swipe a credit card is when making a reimbursed purchase for work that you don't want to spend your cash on now. Using credit cards for international travel or other such transactions may net a better exchange rate; however, check to see if your card charges foreign transaction fees.

Depending on your type of card, you may be able to earn points and cash back rewards that you can use for hotel rooms, airline tickets, concert tickets, perks, and other purchases. In fact, some people use their credit cards for all purchases, no matter how big or small, and pay their balances in full each month by the due date in order to maximize their rewards. Using your credit card to pay everyday bills can also help to build and maintain your credit score over time — an important step toward qualifying for loans in the future.

Security features and consumer protections for debit and credit cards

Both debit cards and credit cards typically come with federally required fraud protection and around-the-clock fraud monitoring. All debit cards and some credit cards require a personal identification number (PIN) at point of sale, which makes it harder for a perpetrator to steal and use your card information.

Should any fraudulent charges appear on either type of card, your credit card issuer or financial institution will typically refund you. However, if fraudulent charges are made with your debit card, your account balance may be temporarily reduced while the fraud is resolved — which could affect your ability to pay bills or make purchases. Unauthorized charges to your credit card are usually removed as soon as they’re identified as fraudulent and won’t impact the amount you owe. Check with your bank or credit card company for their processes regarding fraud or unauthorized charges. Both debit and credit cards are also safer methods than cash when it comes to health protections, as they don't have to pass from your hand to another person's or need to be inserted into a terminal.

Tap to pay is a contactless way to use your debit or credit card that's even faster than dipping or swiping it.

Made ready to make purchases

At Citizens, we understand that you want convenience and peace of mind when you bank and shop online. For those concerned about security, both our debit and credit cards come with Zero Liability coverage¹ — this means, if your card number is fraudulently used to make a purchase, you won't be responsible for that transaction. And if you’re someone who likes to make every purchase count, you can earn 1.8% cash back on everything (yes, everything) with our Cash Back Plus™ World Mastercard®².

And of course - Carrying some cash — but not too much — at any given time can save you from unexpected challenges when credit or debit are not an option.