In this article:
Most people want to avoid racking up credit card debt—but that doesn't mean you shouldn't use your credit card. When used responsibly, credit cards offer valuable rewards that you'll never receive if you only use your debit card.
Although using a debit card can be a safe strategy for living within your means, these cards rarely offer extra rewards or benefits for your spending—but credit cards do. So if you've been thinking about earning some extra rewards by using your credit card more often, check out this guide to see how you can maximize your rewards and get the most bang for your buck.
What Do Credit and Debit Cards Have in Common?
Beyond just their appearance, credit and debit cards have some core similarities. They're both easy and secure payment options that are accepted in many places and serve well as replacements for cash. Most debit and credit cards also come with some sort of fraud and theft protection, and using them in lieu of cash can limit the risk of carrying around physical money.
What's the Difference Between Credit and Debit Cards?
Aside from their few similarities, the way these cards function is pretty different. Debit cards pull from the available balance in your checking account, while credit cards use a bank's money to cover purchases with the expectation that you'll pay the debt back later.
That means with debit cards, you usually won't be able to spend more money than you have—which can be good for people prone to overspending. But with a credit card, you'll be able to spend up to a preset limit (credit limit) assigned by the bank—which can get expensive if you spend more than you can afford each month.
The other major difference between a debit and credit card is the possibility of rewards that comes with using a credit card. To encourage consumers to use their products, credit card issuers offer cash back and reward points to users based on how much they use their cards. Rewards are typically offered for each dollar spent, and over time they can add up.
How to Maximize Rewards by Using Credit Cards
Imagine this: You have $1,000 in your checking account that you've earmarked for this month's spending. Instead of using your debit card to pull cash from your checking account in real time, you use your credit card for the $1,000 in purchases. At the end of the month you then use the $1,000 in your checking account to pay your $1,000 credit card balance—and just like that, you may have racked up several thousand reward points for your spending.
If you want to take it a step further, pay attention to the types of credit cards you're using so that you can maximize your rewards in certain categories. Some cards offer amplified rewards earning for different popular categories of spending, like the American Express® Gold Card, which offers 4 points per $1 spent on dining out, and The Platinum Card® from American Express, which offers 5 points per $1 spent directly with airlines or for hotels booked through the American Express portal.
Who Should Do All Their Spending With a Credit Card?
Consumers who spend responsibly and are not prone to overspending—and who pay their balance in full each month—can benefit from using a credit card instead of using a debit card when possible. Credit cards get expensive when you don't pay your monthly bill in full and your balance gets charged interest—and can defeat the purpose of getting rewards altogether.
If you spend within your means and pay your bill off in full each month, you won't have to deal with interest charges and you'll earn valuable rewards for each dollar you spend.
Who Should Do All Their Spending With a Debit Card?
Stick to your debit card if you have a tendency of impulse buying or overspending. Having a credit card with a high credit limit can be tempting, and for some people, controlling the urge to buy more than you can afford each month can be really difficult.
If you're thinking of making the switch from exclusively using your debit card, take inventory of the credit cards you have in your wallet to make sure you are using the card that gives you the most benefits across different categories of spending.
If you don't have a credit card, check out Experian CreditMatch™, which uses your FICO® Score* to match you with personalized credit card offers. Also consider getting a free copy of your Experian credit report and FICO® Score so you know what lenders will see when they consider you for a new application.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on June 19, 2019, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.