Do I Use A Credit Card Or A Debit Card?

When you go out and eat, put gas in your car or pay for your business expenses, I’m going to assume that you are either using a credit card or a debit card. In your mind, you might think they are the same. But there are differences that you need to be aware of.

Hello, this is Noel Dalmacio, your ultimate CPA at lowermytaxnow.

Here are some differences that you need to be aware of:

1. Cash availability and fees

With a credit card, the money is not immediately taken out from your bank account. And as long as you pay back the credit card company within the allowed period, you won’t be charged interest on the money owed. And you don’t want to make a late payment – interest can build up quickly on credit cards.

In contrast, debit cards are linked to your personal bank account, so you’re using your own money and the charges are automatically deducted from your account. However, you might be charged extra fees on top of interest for any overdrafts.

2. Personal finance and budgeting

Earl Wilson said that there are three kinds of people: “The haves, the have-nots and the have-not paid what they bought.” You don’t want to be in the last group!

With credit cards, you might tend to overspend since you have available cash in a form of a personal loan. On the other hand, because you don’t carry a balance on the debit card, you’re more likely to stick with your budget and not overspend.

3. Consumer liability protection

Federal laws protect you in the event you need to dispute credit card charges and usually cap your liability at $50. Debit cards offer fewer protections than credit cards, including a sliding scale of liability depending on when you notify your financial institution.

Which card is best for you? The answer is generally a mix of the two is a good compromise. You can use a credit card wisely to bolster your credit, while still paying for everyday purchases with a debit card.

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Until then, this is Noel Dalmacio, your ultimate CPA at

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Noel Dalmacio, CPA, CFP, MS TAX
30 Corporate Park, Suite 102.
Irvine, CA 92606

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