"Debit or credit?" It's a question we're asked almost every time we make a purchase, yet more often than not, we're challenged to come up with an answer. You might find yourself arbitrarily choosing between the plastic in your purse or the cash hiding in your pocket, but we were just as confused as you are as to the benefits (or disadvantages) of either one. Thankfully, Business Insider has sorted out this dilemma by offering some key factors to keep in mind when selecting a method of payment. So when is the best time to use each option?
While we wish there was a solid answer, apparently, "it depends." Read on to find out more.
Opting to use cash creates a straightforward transaction. The best times to use this payment option, according to Business Insider, are if you have credit card debt, are making a small purchase from an independent business, aren't great about paying bills on time, or can't resist spending cash when you have it.
Paying with debit allows electronic funds to be instantly pulled from your checking account. Think of this like digital cash (when you spend it, it's gone). This is ideal when you're in credit card debt, you're making a small purchase at an independent retailer, you're buying something online, you want a record of your purchases, you struggle to pay bills on time, or you need the limitations of cash but don't like carrying it.
When you pay with credit, you're essentially spending borrowed money that you and your bank agree you will pay back at a certain time. If your payment is late, you will begin to accrue interest, increasing the amount you will owe the bank. Choose to pay with your credit card if you want insurance on a high-ticket item, you're shopping online, you like the security of being able to get your money back if it's stolen, you want a record of your purchases, or you're trying to build credit.