Can you replace your debit card with a credit card?

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Debit cards and credit cards do not work the same way.

Key points

  • Debit and credit cards are important financial tools, but they differ in many ways.
  • You can use your debit card to withdraw money from your bank account as well as to pay for purchases.
  • If you use a credit card to pay for your purchases, then you must reimburse the credit card company.

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

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

Let’s go over the differences between these two types of cards below.

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What is a debit card?

You can use a debit card to pay for your purchases. Your debit card is linked to your checking account and money is withdrawn from your bank account when you buy something with your debit card. So you use your own money to buy things when you swipe your card.

What is a credit card?

Similar to debit cards, you can also use a credit card to buy things. However, your credit card is not linked to a bank account. Instead, you’ll borrow money when you make a purchase.

Since your card is not linked to a checking account, you will owe the credit card company money when your credit card statement arrives.

If you don’t pay your balance in full each month when your credit card bill comes in, you’ll be charged interest on the balance, which can be very expensive. Using your credit card to charge what you can afford and pay the full monthly balance is a wiser move.

Can you replace your debit card with a credit card?

So, can you replace your debit card with a credit card? For the most part, yes.

You can purchase items from most in-store and online retailers using your credit card. With rewards credit cards, you can earn valuable rewards on your spending. Debit card rewards are harder to find; they are generally not very generous.

In addition, credit cards include extensive fraud protection. You’ll be protected if your credit card is used to make fraudulent purchases because most of the best credit cards offer $0 fraud liability benefits.

So using your credit card like you would a debit card can be a smart move, but it’s essential that you be careful. Do not charge your card without first considering your financial situation. Stick to your budget and only charge what you can afford to pay each month. Credit card debt can be a costly problem that negatively impacts your credit score and finances.

Credit cards can help you build credit

Otherwise, why would you want to use a credit card regularly? If you use your credit card carefully, you can increase your credit. You can increase your credit score by charging purchases to a credit card and then making regular payments to it to pay off your balance each month.

Do not use your credit card to withdraw money

Cash withdrawals are something your credit card doesn’t do as well as a debit card. You can use a credit card at an ATM to get cash, but it’s not the best financial solution.

Your card issuer will charge you a cash advance fee. Typically, these fees range from 3% to 5%, which means you will be making an expensive choice. Suppose you decide to use your credit card to withdraw money from an ATM and your card issuer charges a cash advance rate of 5%. If you withdraw $500, you will pay a $25 cash advance fee. Plus, cash advances typically start earning interest immediately, rather than at the end of your credit card’s billing cycle like card purchases. If you instead use your debit card to withdraw cash from your bank’s ATM, you won’t pay any fees.

Should you stop using your debit card?

With the cost of cash advance fees in mind, you probably won’t want to get rid of your debit card anytime soon. Here’s what you can do instead: Plan to use your debit card to withdraw cash from ATMs, but get in the habit of using your credit card for everyday purchases. This way, you can boost your credit, potentially earn credit card rewards, and take advantage of credit card fraud protection.

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