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Credit Card vs. Debit Card: 5 Reasons a Credit Card Makes Sense

You may have both a debit card and a credit card in your wallet. Which one do you pull out most often at the cash register? Depending on your financial goals, you might consider using a credit card more often.

December 10, 2020 in Learn

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Credit cards vs. debit cards: how are they different?

One major difference between a debit and credit card is the source from which you’re drawing funds. A debit card withdraws cash from your bank account. A credit card borrows funds that you’ll have to pay back from an financial institution. In addition to providing a short-term loan, credit cards can come with extra benefits. If used wisely, credit cards can be valuable financial tools.


Here are 5 reasons you may want to use credit cards rather than debit cards.

1. Greater purchasing power

One of the benefits of a credit card over a debit card is that you can use it to increase your purchasing power. It increases your cash flow above the amount you already have in your chequing account. Using a debit card can help ensure you use only the amount you actually have in your bank account, but you may also run out of funds since your cash flow is restricted.

2. Purchase protection

Some credit cards come with purchase protection coverage. For example, some American Express Cards are eligible for the Purchase Protection® Plan1†. If you purchase an eligible product with your Card, and it gets stolen or damaged within a covered period of time from date of purchase, its replacement or repair may be covered, depending on your Card.

3. Fraud

The benefits of a credit card over a debit card to buy something can include less risk if you become a victim of fraud. If someone steals your debit card, they could access all your savings immediately. With a credit card, the damage fraudsters could do is more limited. But even if you use a credit card, fraud is still a possibility, so make sure you take reasonable measures to protect yourself against it.

4. Credit card rewards

Some credit cards are enrolled in a rewards program. Every time you make a purchase, you could earn cash back or accumulate points or miles to redeem for a variety of things. Using a credit card to pay for things you would buy anyway, like groceries, could give you more value for your money.

Access to offers and events

Some credit cards may come with unique offers and invitations to events. For example, the Cobalt Perks program rewards American Express CobaltTM Cardmembers with unique offers and experiences regularly.

5. Build your credit history

Using a credit card for your purchases can help you build your credit history. If you are paying your balance on time, this can help build a track record of managing your debt and can increase your score.


A high credit score helps your chances of getting loans and lower interest rates in the future. This can save you money on bigger purchases, such as a home or a car. When you use a debit card, it does not affect your credit rating because your activity on it does not get reported to the credit bureau.

When you should use a debit card

If you are working on reducing debt or keeping your debt low, a debit card may make more sense. Using a debit card prevents you from accruing debt: while you know the purchase price of an item today, carrying that cost on a credit card past your statement due date can increase the total cost of the item.


Ultimately, if your credit card can’t offer you anything of value from your next purchase in the form of rewards points, purchase protection, or financing purchases that your chequing account can’t handle, a debit card can be a sensible option.


If you are working on building your credit history, however, using a credit card for everyday purchases that you can repay each month can help you build your credit score. As with any financial decisions, learning about credit and balancing your spending between credit and debit cards helps promote a healthy approach to credit.

Bottom line: a credit card makes sense when used wisely

Choosing to use your credit card wisely can offer several benefits that may not be included with your debit card spending. Especially when you can comfortably repay your credit card balance, using your credit card can provide value through rewards programs like the Membership Rewards® program from American Express, an opportunity to build your credit score, and shopping protection.

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