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Sometimes it makes sense to fish around at the bottom of your purse for your wallet and pay with the first card you happen upon. But it pays to make a more intentional decision about what you use.

The credit card vs. debit debate is a long-standing one. According to recent Consumer Payment Study by credit card processor Total System Services, 48 percent of Americans prefer to shop online using a credit card, while 28 percent opt for debit.

Given that credit card purchasing is a great way to accumulate travel and retail rewards, and shop without the constraints of your bank account, it makes sense to use credit as your primary mode of payment, right? Well, it’s a little more complicated than that. Let’s take a look and when you should use one method of payment over the other.

The benefits of credit cards

If you’re looking to build credit (and someday qualify for a loan or purchase real estate, for example), making purchases through credit and paying them off in full each month is a great idea, according to Beck. Plus, credit card issuers will often reward you with perks if you pay off your monthly bill on time, offering the likes of increased credit limits, lines of credit and gift cards and upgrades towards travel and retail.

Because U.S. credit cards are covered under the Fair Credit Billing Act, you’re limited to $50 in liability for unauthorized charges, and there is a dispute procedure in place for billing errors, according to Jackie Beck, personal finance expert and creator of the app Pay Off Debt. However, you need to notify the card issuer in writing to be protected, and there’s a time limit of 30 days after you’ve received your statement to notify them of billing errors.

When to use a credit card

Specifically, she said credit cards are useful when booking travel, hotel stays, and paying for risky purchases that are more vulnerable to fraud like gas, online purchases and restaurants when your card leaves your presence.

They’re also ideal for more expensive items or services, since the dispute protections can be greater, as well as placing incidental holds when booking hotels or rental cars to avoid any freezes on your checking account.

“Of course, they’re also good for any purchases you want to get rewards or benefits like extended warranties for,” she said. “Review your card issuer’s agreements to see what types of benefits and fees might apply.”

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When not to use a credit card

While running your normal everyday purchases through a rewards credit card is a great way to organically earn miles, hotel stays, and more, you should cut the cord on the card if you find yourself spending more money than you otherwise would, or even failing to use those rewards, according to Beck. If you’re working on getting out of debt (especially credit card debt), you ideally want to avoid using your credit card entirely.

The benefits of debit cards

Debit cards are easy to qualify for since they usually come with your checking account. They can help you stay out of debt because they limit you to spending only what’s in your checking account. Using your debit card to withdraw money from an ATM of your branch won’t cost any pesky fees like a credit card cash advance or out-of-network debit withdrawal would.

When not to use a debit card

Debit cards essentially operate as digital cash — they use money from your bank account in real-time, rather than building up a lump sum for you to pay off monthly. That means you don’t want to purchase anything on debit that you can’t pay in full immediately.

Using a debit card while traveling can get a little tricky, too. “Some merchants like hotels, car rentals, and gas stations automatically place a hold on your account that’s larger than the amount of the purchase you’ll be making,” said Beck. “And those holds can last for days. So if you decide to use a debit card with merchants like that, remember that you’ll have less money available to use in your account until the hold is released.”

Keep in mind that you don’t have the same level of protection when using a debit card as you do a credit card, according to Beck. Under the Electronic Fund Transfer Act, debit cards do have the same $50 limit as credit cards for unauthorized charges initially, but if you don’t notice them within two business days, the amount you can be liable for goes up to $500, and if you wait more than 60 days after your statement is sent to report the unauthorized charges, you might be responsible for the entirety of the bill. That said, banks and card issuers still have specific measures they take to handle and prevent fraudulent charges on debit cards, so not all hope is lost.

Marissa Miller
Personal finance and travel writer