When it comes to earning rewards and getting more for your money spent, credit cards are hands down better than debit cards.

Why? Credit cards that pay rewards give you a nice percentage back on the total amount you spend, which can add up fast…

Not only that, they provide other benefits such as travel insurance and purchase protection, juicy perks, and better protection against fraud.

8 reasons why use credit card over debit

1) The rewards are way better

The most compelling reason why you should pay for almost all purchases using your credit card instead of your debit card is the rewards.

The rewards on a credit card mean you get MORE value for your dollars spent.

Here’s a quick table on how much more you can earn per year if you use your credit card instead of a debit card. (This assumes your debit card doesn’t pay you anything for your spend and that you can earn 2% back on all credit card purchases.)

Annual Spend Credit Card Rewards Debit Rewards Difference
$12,000 $240 $0 $240
$24,000 $480 $0 $480
$36,000 $720 $0 $720

The difference is clear – and the more you spend on things you’d buy anyway, the more rewards you can earn (and the more you should be using a rewards card).

Another simple reason to quit your debit card is bank fees.

Depending on the bank account you have, you might be paying up to $15 per month just for using your bank account. That also adds up fast, and can leave you with $180 less per year.

By paying bank fees and using debit cards often, not only are you losing out on rewards – you are paying for the account each and every month.

You’ll need to compare the bank fees with the annual fees that accompany most premium rewards cards. If you typically spend more than enough to cover the annual fee, then you are most likely better off with a rewards card.

If the credit card has an annual fee of $100 and you can earn 2% back this means you’ll need to make sure you are spending at least $5,000 per year to break even on the annual fee.

(Annual spending x Annual return on spending) – Annual fee = Net annual rewards

Annual Spending Annual Fee Net Annual Rewards at 2% Earn Rate
$1,000 $100 -$80
$5,000 $100 $0
$10,000 $100 $100
$20,000 $100 $300

2) Extended warranty

When you make a purchase on a debit card you don’t have an extended warranty. But when you make a purchase on a rewards card, your card probably offers an extended warranty on the item you’re buying.

My Capital One Aspire Travel World Mastercard doubles the warranty on the item (up to 2 years). This came in handy when I recently bought a toaster that suddenly stopped working after just over a year. The toaster had a standard one year warranty, but with the extended coverage, I was able to have the item replaced free of charge. If I paid using my debit card I’d have to buy a new toaster myself.

3) Price protection

Did you know that you can save money after buying an item? It’s true.

Some credit cards offer price protection, where if you buy an item and the price of that same item goes down within 60 days (check your card’s fine print) of when you bought it, you can be reimbursed the difference.

This can come in handy when you are buying an item that might drop in price in the near future, but you have to buy it now. You can even shop at your preferred store and willingly pay a higher price to shop there and get refunded for the difference later. Debit cards don’t offer price protection at all.

4) Theft, loss, and damage protection (i.e. purchase protection)

Finally, theft / loss / damage protection is yet another advantage credit cards offer.

Using my Capital One card, if the item I buy is damaged or stolen within 120 days of the purchase then it will be replaced or repaired for no additional cost.

As you can tell, credit cards offer more consumer protection for purchases in general than debit.

Because, with items bought on credit, your money doesn’t leave your account until the end of the billing cycle.

With a debit card, once you make a purchase the money leaves your account immediately – which means there is little to no recourse in the event something goes wrong.

As a rule of thumb, I always use my credit card for purchases over $20, simply because I know I will be covered in case something goes wrong.

5) Protection from fraudulent transactions

Lately consumers are concerned about fraudulent transactions (as they should be).

With a credit card, I have a chance to review my monthly statement and flag any unauthorized purchases before I’m out any money.

With a debit card I don’t have that opportunity because the money is already gone from my bank account.

Fraud can occur while using either a debit or credit card, so it’s important to review your monthly statement carefully and flag any unrecognized purchases right away.

It’s true that your bank will eventually reimburse you for fraudulent debit transactions, as long as you aren’t at fault, but you will be out the money until the dust settles and they figure it all out.

Related: Juggling Multiple Rewards Credit Cards to Maximize Your Rewards

6) A defense against stores that don’t deliver as promised

Most stores and retailers treat their customers at least decently well and usually deliver on their promise of providing goods and services.

However, there’s always exceptions that are either looking to rip you off, blame you for a missing package, or give you terrible service after you’ve already paid.

Credit cards are a great line of defense against this. You can actually call your credit card company and explain to them how a store or service provider didn’t deliver on their promise.

The credit card company has the ability to “chargeback” the company and take the money right back out of their account – and refund it to you.

They will normally insist you try to resolve the issue with the store first, but if that fails they will consider doing a chargeback. Not only will the store lose all the funds from the sale, but they’re often dinged with an extra penalty fee from the credit card company on top of that.

It will make them think twice about poor customer service and not delivering on their promises in the future.

7) It can help build your credit

Having a long history of responsible credit use is great for improving your credit score.

There’s nothing better out there for improving (or ruining) your credit score than a credit card. As long as you pay your card off like clockwork, your credit score will benefit and continue to climb (see how).

Paying before the due date is always advised, but keep in mind that as long as you aren’t more than 30 days late paying – that one time you forget – the credit card issuer likely won’t report it to the credit bureaus so your score should be safe.

Keeping a no fee credit card active for your entire life, even if you rarely use it, is a great way to boost your score.

8) There’s some pretty great free perks to be had

Many premium credit cards come with plenty of free extras that can really add to the value of using a credit card. Here’s a preview:

  • sign up bonuses,
  • incredibly flexible rewards,
  • personal concierge service,
  • airport lounge access,
  • free flights for your traveling companion,
  • and much more.

Using less debit

The first step after applying for and receiving a rewards card is to get into the habit of paying for everyday purchases with your credit card instead of your debit card or cash.

Think of it this way – the higher the purchase amount, the more rewards you will earn.

You’ll also want to switch any automatic monthly payments from debit to credit. To do this you’ll need to notify the companies about the change which can usually be done online. It’s a bit of a hassle at first but it only needs to be done once.

In some jurisdictions you can even pay for your monthly utility bill using a credit card. I use my rewards card to pay for:

  • home/auto insurance,
  • internet bill,
  • cell phone bill, and
  • virtually all purchases over $20.

You’ll want to keep in mind that whatever amount you put on your credit card will need to be paid at the end of the month.

Any amounts not paid will start to accumulate steep interest charges which would quickly cancel out any rewards earned.

Rewards cards can be a powerful tool to maximize the value for your money, but they need to be used responsibly.