When to Use Credit or Debit

You've probably heard numerous financial experts say that it is best to go for debit over credit. Their reason? By only making purchases with your debit card (or cash), you do not spend more than what's in your bank account.

While that's true, if you are financially responsible, using a credit card is often the wiser move. Here, the scenarios that you should choose credit over debit.

If you're fixing your credit

Say you've made a few money mistakes attending college and today your credit rating is lower than you would like. Swiping your charge card can help your score inch upward, as long as your act responsibly. Debit card usage is not reported to the credit rating agencies. Making use of your credit card-and paying your bill in full, on time each month-helps you establish good, responsible credit rating, increasing your score.

If you're stockpiling rewards

Many credit cards offer excellent rewards programs where one can redeem points for airline travel, hotel rooms, household electronics and appliances, or perhaps college savings. Charging many (or perhaps all) of the purchases-including recurring household expenses-can be a savvy method to rack up your wages.

If you are making a sizable purchase

Some charge cards offer extended warranty protection beyond what's supplied by the manufacturer or even the retailer. Use your charge card to purchase your new refrigerator or flat-screen television and you will automatically receive this coverage. (Check your card terms for specifics.)

If you are going on vacation

It's best to pay having a credit card when booking a hotel and hiring a car. Why? Many hotels and rental companies only accept charge cards when making a reservation. If they do accept an atm card, they might put a hold of several hundred dollars like a deposit. Until the hold is processed, you will not get access to that cash.

Secondly, using a charge card for travel-related purchases can provide you with instant access to perks, for example earning additional rewards points or complimentary car insurance for your car rental.

If you're shopping online

When you purchase something from a brick-and-mortar store, you depart the merchant with the item in hand. If you make a purchase online, you're taking a risk since can't examine the particular product until it arrives on your doorstep a few days later. Using a charge card to shop online protects you just in case something arrives damaged, was misrepresented in its listing, or if it gets lost in transit. (Negotiate using the merchant to settle the situation or ask your issuer to withhold payment towards the retailer.) Otherwise, once you enter your debit card account information to help make the purchase, the money is immediately withdrawn from your banking account. Leaving you without cash with little or no recourse.