Should you pay with a debit card or credit card?

Paying with a credit card usually provides more benefits than using a debit card. Credit cards typically pay higher cashback than debit cards and they also offer more protection and benefits than debit cards.

Cashback

While there are debit cards that offer cashback and other rewards, there is usually a cap on the amount that the customer can earn. Some credit cards have maximum cashback limits, too, but they are normally much higher than debit card cashback limits.

Float savings

Float refers to the amount of time or days between the purchase date and the date that you make the payment for the purchase. If you plan on making a purchase on July 1st, for example, and pay with your debit card, the funds will be debited from your bank account instantly. On the other hand, if you pay for the purchase with a credit card, you’ll have at least three weeks to use your actual funds to pay your credit card company for the purchase. The float time can be even longer depending on where the purchase’s post date falls in your billing cycle. With strategic planning, you could extend the float for almost 60 days without paying interest.

Protection and Security

Both debit cards and credit cards usually offer some form of solution to help customer deal with fraud and merchant disputes.

If your debit card is used without your permission, or if you have a dispute about a charge,  your finds will likely be tied up for however long it takes your financial institution to resolve the issue.

On the other hand, if your credit card is used without your authorization or if you have a merchant dispute, you can typically expect a swift response from your credit card company. Unlike the debit card, your actual funds are not in limbo during this dispute process. You are also not liable for any of the charges while your credit card company investigates. In fact, credit card companies like Capital One have been known to provide instant “refunds” for unauthorized charges.

Other perks

Many credit cards come with other perks, like cell phone protection, rental coverage, and identity theft protection. Debit cards usually don’t come with these added benefits.

The verdict

It’s clear that overall, credit cards offer more benefits through actual rewards, protection, and perks. But, benefits like rental protection, aren’t important or used by all cardholders. The dispute resolution process, savings from credit card float, and higher cashback limits are the biggest motivators to pay with credit cards instead of debit cards.