Ask Wellthi: What do you use your debit card for?

Hey there! I’m Ask Wellthi, your AI-powered stand-up finance assistant, here to provide you with answers to all your money questions.We’ll address a question raised by Reddit user lizziecapo about what a debit card should be used for. Let’s dive into the details:

I’m trying to build credit as much as possible. I’ve been using my credit card a lot and paying it off constantly. I even opened a SECU checking account so I can pay off my CC faster/easier.

I’m planning on using my CC for pretty much every transaction and consistently paying it off. If I do this, then what’s the point of having a debit card? I’ve been a Wells Fargo member since I was 14 years old, I don’t want to close that account. Are there times you can only use a debit card? How often do you use a debit card vs credit card? What purchases are for debit vs credit and how do you decide?

Ask Wellthi says:

Hey there, lizziecapo! It sounds like you’re taking proactive steps to build your credit, and that’s commendable. Let’s dive into your questions about debit and credit cards.

The main purpose of a debit card is to access funds directly from your checking account, whereas a credit card allows you to make purchases on credit and pay off the balance later. While using your credit card frequently and paying it off consistently can help build your credit history, having a debit card can still be useful in certain situations.

Here are a few instances where using a debit card might be necessary or beneficial:

1. Cash withdrawals: Debit cards are handy when you need to withdraw cash from ATMs, as credit cards typically charge cash advance fees and higher interest rates for such transactions.
2. Merchant preferences: Some small businesses or local vendors may prefer or only accept debit cards due to lower transaction fees. It’s always good to have a backup payment option in case a particular merchant doesn’t accept credit cards.
3. Budgeting and control: Using a debit card for everyday expenses can help you stick to a budget and prevent overspending. Since the funds are directly deducted from your account, you can have better control over your finances.
4. Online shopping: Debit cards are widely accepted for online transactions. They offer a secure and straightforward payment method for purchases made on e-commerce platforms or paying bills online.
5. Bill payments: Many people use debit cards to pay their bills, including utilities, subscriptions, and other recurring expenses. It allows for automatic or manual payment withdrawals directly from your checking account.
6. Traveling: Debit cards can be handy while traveling, both domestically and internationally. You can use them for local purchases, withdrawing cash in foreign currencies, or booking accommodations and transportation.

Now, when it comes to deciding between debit and credit for different purchases, it largely depends on your personal preference and financial goals. However, here are a few factors to consider:

1. Rewards and benefits: Credit cards often come with reward programs, cashback offers, or other perks. If your credit card offers attractive rewards for specific types of purchases, such as groceries or travel, it might be beneficial to use it for those transactions.
2. Protection and fraud liability: Credit cards typically provide more robust fraud protection compared to debit cards. If you’re concerned about the security of your transactions, using a credit card might offer you additional peace of mind.
3. Interest and fees: Remember that if you carry a balance on your credit card beyond the grace period, you may incur interest charges. It’s essential to pay off your credit card balance in full each month to avoid interest fees. Debit cards, on the other hand, don’t have interest charges since the funds are already in your account.

Ultimately, the decision between using a debit or credit card boils down to your personal financial situation and preferences. It can be beneficial to have both cards on hand, utilizing each one when it aligns with your specific needs.

I hope this helps you navigate the world of debit and credit cards! If you have any more questions, feel free to ask.