But there are pitfalls: Overspending, having too high a credit utilization ratio or routinely missing payments will actually depress your credit score. If you’re looking to build or establish credit, using a credit card responsibly is one of the best ways to do it. Spending on a debit card has no impact on your credit score. In general, a debit card doesn’t, though a few offer modest amounts of cash back on spending. A good rewards credit card lets you earn points, miles or cash back whenever you make a purchase. Maximize your rewardsĪ credit card has a clear advantage over a debit card when it comes to earning rewards. As such, you’ll need to pay closer attention to what you spend on a credit card to avoid interest charges. But because of the lag between swiping a credit card and paying your monthly statement, it’s not hard to overspend. Most debit card fees - including ATM fees, overdraft fees and nonsufficient funds fees - are easily avoidable. With both credit and debit cards, you must remain conscientious to steer clear of fees. You can apply the same logic to your credit card by swiping only when you have sufficient funds available. Here are a few reasons to use a credit card with a debit card mentality: Avoid overspendingĭebit cards require that you spend only what you have in your checking account if you haven’t opted in to overdraft protection, you’ll incur an overdraft fee if you spend more than you have. If you approach spending with a credit card like you would with a debit card, you’re less likely to overspend. Reasons you might want to use a credit card like a debit cardĬredit cards allow you to build credit and earn rewards, and they typically provide an additional layer of security that you won’t get from a debit card. If you’re disciplined, you won’t spend beyond your budget and you will still benefit from all of your card’s perks and rewards. If you intend to use a credit card like a debit card, you’ll make purchases with your credit card only when you have enough money in your checking account to cover them. But if you don’t, and end up carrying a balance, you’ll accumulate interest charges, which can be quite high. You won’t have to pay any interest if you pay off your balance in full before your credit card grace period ends. When you use credit to make a purchase, the credit card issuer pays for the transaction and you pay it back later. The purchase will be approved, as long as there’s enough money in your account to cover it. Essentially, you’ve paid for the product or service in real time, so there’s nothing to “pay off” later. When you swipe your debit card to pay for a transaction, the funds are withdrawn from your checking account. Can I use a credit card like a debit card?
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