Can you replace your debit card with a credit card?

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Debit and credit cards function differently.

key point

  • Debit and credit cards are important financial tools – but they are different in many ways.
  • You can use your debit card to withdraw cash from your bank account and pay for purchases.
  • If you paid for your purchase with a credit card, you must pay the credit card company.

Credit cards are powerful personal finance tools. While you should use them with care, they can make everyday purchases easier for you.

You may be wondering if you can use a credit card instead of a debit card. While your credit card can’t do everything a debit card can, it can do a lot—and in some cases, more. In fact, you can cover most of your financial needs by using a credit card instead of a debit card.

Let’s review the differences between these two card types below.

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What is a debit card?

You can pay for purchases with a debit card. Your debit card is linked to your checking account, and when you make purchases with your debit card, the money will be withdrawn from your bank account. So, when you swipe your card, you’re buying something with your own money.

What is a credit card?

Similar to a debit card, you can also use your credit card to buy things. However, your credit card is not associated with a bank account. Instead, you borrow money when you buy.

Since your card isn’t linked to a checking account, you’ll owe money to the credit card company when your credit card statement arrives.

If you don’t pay the full balance in full when your monthly credit card bill arrives, you’ll be charged interest on the balance — which can get very expensive. It’s wiser to use your credit card to charge what you can afford and pay the entire monthly balance.

Can I use a credit card instead of a debit card?

So, can you replace your debit card with a credit card? Mostly right.

You can use your credit card to buy items at most brick-and-mortar stores and online retailers. With a rewards credit card, you can earn valuable spending rewards. Debit card rewards are harder to come by; they’re usually not very generous.

Additionally, credit cards include extensive fraud protection. If your credit card is used to make a fraudulent purchase, you’ll be protected as most top credit cards offer a $0 Fraud Liability Allowance as a benefit.

So, it might be wise to use a credit card like a debit card — but use it sparingly. Don’t charge your card without first considering your financial situation. Stick to your budget and only charge what you can afford each month. Credit card debt can be a costly problem that can negatively impact your credit score and finances.

Credit Cards Can Help You Build Credit

Why use a credit card so often? If you use your credit card sparingly, you can build your own credit. You can improve your credit score by charging your credit card for purchases and then making regular payments to pay off the balance each month.

Do not use your credit card to withdraw cash

Cash withdrawals are one thing your credit card can’t do as well as your debit card. You can withdraw money with a credit card at an ATM, but it’s not the best financial move.

Your card issuer will charge you a cash advance fee. Typically, these fees range from 3% to 5%, which means you’ll be making an expensive choice. Suppose you decide to use your credit card to withdraw cash at an ATM, and your card issuer charges a 5% cash advance rate. If you withdraw $500, you will pay a $25 cash advance fee. Additionally, cash advances typically begin to accrue interest immediately, rather than at the end of a credit card billing cycle, such as on a credit card purchase. If you use your debit card to withdraw money at your bank’s ATM instead, you’ll pay a $0 fee.

Should you stop using your debit card?

You probably don’t want to get rid of your debit card anytime soon, given the cash-advance fee. Here’s what you can do: Plan to use your debit card to withdraw cash from ATMs, but get into the habit of using your credit card for everyday purchases. This way, you can build your credit, potentially earn credit card rewards, and take advantage of credit card fraud protection.

Are you considering applying for a credit card? Check out our list of the best cash back credit cards to learn more about cards that offer cash back rewards.

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