Another shopping season is here. With all the gifts you plan to buy, saving where you can is a high priority. Can those well-used pieces of plastic help? Yes, if you use them wisely. Here is what to consider with your debit vs. credit card options:

Debit card advantages

Sticks to a budget: Are you trying to reduce your credit card debt? Or perhaps you’re on a strict budget for your holiday shopping. In either case, using a debit card can help because you can spend only what’s in the account that card is tied to.

Helps out small businesses: If you want to do the retailer a favor, use a debit card, which has lower transaction fees.

Avoids credit fees: Some businesses charge transaction fees if you use a credit card. Want to avoid them? Go debit.

Avoids cash advance fees: If you get cash from an ATM with your credit card, the transaction may count as a cash advance, which often comes with a hefty fee. Instead, use a debit card, preferably one with no out-of-network fee.

Credit card advantages

Limits fraud: Credit cards offer some types of fraud protection that debit cards don’t. When you’re shopping online, credit card issuers watch for suspicious transactions. And if your credit card itself is compromised, you can promptly cancel it; your liability is typically capped at $50. Protection for debit cards depends on when you report the fraud. Even if you do it quickly, you may not receive your refund until the bank completes its investigation—which could take weeks.

Establishes/improves your credit: Another important factor to consider in the debit vs. credit card debate: Credit cards build your credit history (unlike debit cards). If you’re careful with it, using a credit card can improve your credit score.

Rewards: Some credit cards give you cash back, travel perks or points for spending a certain amount. These can be redeemed for other purchases or statement credit.

Short-term “loan”: If you’re strapped for cash, your credit card is an easy way to buy now and pay later. Just be prepared to pay the balance at the end of the billing cycle, or interest charges will accrue on the outstanding amount.

Warranty protection: Some credit cards offer warranty protection on large purchases, like electronics and appliances.

Debit vs. credit card: selecting the “credit” option with a debit card

Debit cards allow you to select “debit” or “credit” at the point of purchase. Choosing “credit” changes the way the transaction is processed, but it doesn’t provide the protection of an actual credit card and it won’t help you build your credit history.

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