4 reasons why you should use a credit card instead of a debit card

Credit cards are generally safer than debit cards, as long as you use them responsibly. Crystal Cox/Business Insider

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• Using a debit card instead of a credit card is a surefire way to avoid credit card debt. However, it opens the door for a lot of headaches if your card is ever stolen.
• Credit cards can help build your credit history, protect your checking account from fraud, and earn you valuable rewards.
• If you spend within your means and pay off your balance in full every month, you'll avoid paying interest fees, as well as debt.

You should avoid credit card debt due to the crippling interest rates and the long-term havoc it can wreak on your finances, but that doesn't mean you should necessarily avoid using credit cards. In fact, there are a number of benefits to using them, including the chance to build your credit profile, and the opportunity to earn valuable rewards.

The important thing is to use your credit card as if it were a debit card.

That means not spending more money than you have, and not carrying a balance month to month by just paying the minimum amount or only part of your balance, which incurs interest fees the next month. Instead, you should pay the balance off in full every month, which not only helps you avoid interest, but also means that you don't end up overspending and winding up in debt.

So why not just use your debit card to keep everything easier? There are actually a few reasons.

1. To protect your bank account

Credit cards offer more robust fraud protection and offer a degree of separation from your checking account, which serves as an added safety measure.

Debit cards are connected directly to your checking account. Whenever you make a purchase — whether that purchase is processed as credit or as debit — funds are drawn immediately from that account and transferred to the merchant. In that way, it's like an electronic check.

Read More: I almost never use my debit card outside of ATMs for 2 important reasons

If a thief gets hold of your card — either the physical card, or just your information from it — and goes on a spending spree or makes a withdrawal, you lose the cash the person spends. That means money disappearing from your checking account. If you had a set amount in there earmarked for things like utilities, rent, tuition, or something else, you won't have access to that money. While most banks and debit card processors offer at least basic fraud protection, if not more, you may not get the cash back right away, particularly if a long investigation is required.

With a credit card, however, money in your bank account isn't touched until you pay your statement. If someone steals your number and makes fraudulent charges, you can flag those charges for the card issuer, and you won't have to pay them — the card will be frozen — pending an investigation into the fraud. You don't have to worry about losing cash and the inconveniences associated with that, like losing the money for your rent.

2. To earn rewards

Although many rewards debit cards used to exist, the Durbin amendment to the Dodd-Frank consumer protection act passed in 2010 limits the fees banks can charge merchants to process debit cards. Consequently, consumer use of debit cards at retailers is less profitable to card issuers, so those issuers have less reason to incentivize consumers to use them.

Credit cards, however, remain profitable to banks, so they've invested more heavily in offering consumers a cut of those merchant fees in the form of rewards. Cards like the Chase Sapphire Preferred® Card offer 2x points on travel purchases made outside of Chase Ultimate Rewards® and 3x points on dining, while the Chase Freedom Unlimited® offers 1.5% cash back on most purchases.

Between those, and high sign-up bonuses — the Chase Sapphire Preferred® Card offers 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening, and the Chase Freedom Unlimited® offers 1.5% cash back in addition to regular earning on everything you buy up to $20,000 spent in the first year (worth up to $300 cash back) — rewards credit cards can be lucrative for getting cash back or earning points toward travel.

Just make sure to always pay off your full balance so that you don't end up in credit card debt, or paying interest. Even with a low APR, the costs of interest fees will more than outweigh any rewards you can earn.

3. To build your credit history

Just about every adult has a credit profile, which is kept by credit reporting bureaus. This profile contains information about every loan you've applied for, held, and paid. All of that information makes up your credit score, which is a numerical representation of your credit profile.

Your credit score is positively affected by things that show a history of using credit responsibly, such as a history of on-time payments, having held multiple accounts, not having too much debt, and having held access to credit for a long period of time. On the other hand, it's negatively affected by things like missing a payment or being late, or not having much history of holding credit.

When you use and pay a credit card every month, that adds another positive data point to your credit profile, which, in turn, helps build and raise your credit score. When it comes time to apply for a major loan like for a car or a mortgage, you'll be more likely to be approved at a low interest rate if you have a positive credit history. Using a debit card, on the other hand, doesn't affect your credit history at all.

4. For better purchase and travel protections

Many credit cards offer certain purchase and travel protections. For example, the Chase Sapphire Preferred® Card offers robust coverage, such as trip delay insurance— that covers your costs for things like hotels, clothing, food, and toiletries for up to $500 per person if your flight or other travel is delayed overnight, or more than 12 hours during the day. 

In the event of a dispute with a merchant, a credit card will also give you the ability to request a charge-back. That's when you dispute a charge, the credit card company investigates, and you don't have to pay for it until the investigation is finished — if your dispute is legitimate, the charge will be waived on your statement. An example of this is when passengers are stranded by an airline that goes out of business — it's one of the only ways they can get their money back. 

Similarly, I once had to dispute a charge with an emergency plumber, when he charged me for work my landlord hadn't authorized. I got the difference in money back from my card company, and was only charged for the original work order (which my landlord reimbursed).

Another offering is purchase protections — if something you buy is damaged, lost, stolen, or otherwise made unusable within 120 days of buying it, you'll be covered for up to $500 per claim (and up to $50,000 per account), as long as you used the card to buy it. The card also comes with extended warranty protection, which offers an extra year of coverage on eligible purchases that come with a manufacturer's warranty of three years or less.

Debit cards generally don't offer similar protections, which means that you're better off using a credit card for your major purchases and travel.