Acan help you finance a large purchase, and — but it can also torpedo your finances if you routinely miss making payments, regularly carry a balance or dig yourself into debt. Spending money with a , on the other hand, does not involve paying interest, since you withdraw money from your own each time you swipe. Each type of card has a place in a healthy financial gameplan. But if you’re looking to mitigate the risks of using a credit card while taking advantage of the benefits, using your credit card like a debit card is one smart way to do it.
Can I use a credit card like a debit card?
When you swipe your debit card to pay for a transaction, the funds are withdrawn from your checking account. Essentially, you’ve paid for the product or service in real-time, so there’s nothing to “pay off” later. The purchase will be approved, as long as there’s enough money in your account to cover it.
There’s an altogether different model with a credit card, however. When you use credit to make a purchase, the credit card issuer pays for the transaction and you pay it back later. You won’t have to pay any interest if youin full before your credit card ends. But if you don’t, and end up carrying a balance, you’ll accumulate interest charges, which can be quite high.
Using a credit card like a debit card requires a mindset shift. You make purchases with your credit card only when you have enough money in your checking account to cover them. 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.
Reasons you might want to use a credit card like a debit card
Credit 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 approach spending with a credit card like you would with a debit card, you’re less likely to overspend. Here are a few specific rationales for using a credit card with a debit card mentality:
Debit cards, especially if you’ve opted out of, force you to spend only what you have in your checking account (lest you incur ). You can apply the same logic to your credit card by swiping only when you have sufficient funds available.
Avoid interest charges and fees
With both credit and debit cards, you must remain conscientious to steer clear of fees. Most debit card fees — including ATM fees, overdraft fees and— are easily avoidable. But because of the lag between swiping a credit card and paying your monthly statement, it’s not hard to overspend. As such, you’ll need to pay closer attention to what you spend on a credit card to avoid charges.
Maximize your rewards
A credit card has a clear advantage over a debit card when it comes to earning rewards. A goodlets you earn points, miles or cash back whenever you make a purchase. In general, a debit card doesn’t, though a few offer modest amounts of cash back on spending.
Spending on a debit card has no impact on your. If you’re looking to build or establish credit, using a credit card responsibly is one of the best ways to do it. But there are pitfalls: Overspending, having too high a or routinely will actually depress your credit score.
Credit cards offer fraud liability protections that most debit cards do not. Major credit card networks like Visa, Mastercard, American Express and Discover offer protection to victims of fraud, so you won’t be held liable for any purchases you didn’t make. Debit cards do provide some degree of fraud liability protection, however: You’ll be on the hook for a maximum of $50 if you report your card as lost or stolen within two business days. Your liability increases to $500 if you report your credit card as stolen after three to 60 days.
Tips for using a credit card like a debit card
- Don’t spend more than you can afford.
- Don’t make a purchase if you don’t have sufficient funds in your bank account to pay for it.
- Always pay your bill on time.
- Always pay your full statement balance.
- Understand your credit card APR and .
- to take advantage of stronger fraud protection.
The bottom line
Using your credit card like it’s a debit card will make it easier to stay within your budget. And using your credit card responsibly adds valuable benefits such as rewards, a higher credit score and enhanced fraud protection.
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