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  • Writer's pictureOnlyFunds Investment Adviser Staff

When to Use a Credit Card vs. a Debit Card, and How to Get Started

So, you're starting to make some money, and you're wondering - should I get a credit card? Isn't credit card debt bad? But what about the points and all these perks I hear about? We break it down for you below when and how to use that credit.

If you're not sure about whether you should get a credit card:


  • It builds your credit score up: As long as you're making on-time payments, the longer you have a credit card and the more you use it, the better for your credit. When it comes time to get an auto-loan or a mortgage, a good credit score from a long history can save you thousands of dollars in interest.

  • You get rewards for spending you were already going to do: Most credit cards come with some rewards from cash back to free travel to gift cards, at around 1 or 2% of purchases. If you spend $20,000 a year on purchases, you're potentially losing out on $400 of free stuff or cash back a year by not using a credit card.

  • Perks! Credit cards will often come with free perks on the things you purchase like free roadside assistance, access to airport lounges, purchase protection, UberEats credits, and more.


  • It gives you a way to spend above your means: If you have a tough time resisting splurging with the last $5 in your bank account, a credit card may not be for you. It may seem like magic to be able to swipe and get what you want immediately, but you'll eventually have to pay. And if you can't come up with the money...

  • Credit card debt can be extremely hard to get out of: Because they're charging you interest on the unpaid balance of your credit card, if you only make the minimum payment each month, you will go more and more into debt. Even when you start to get enough cash to be able to pay it down, you'll still be paying interest payments while doing it. It can be an unsustainable cycle if used incorrectly.

  • Some of them just aren't worth it: As we go into below, some credit cards have annual fees. These can often be the best bang-for-buck, but only if you squeeze all the money out of them you can. If you don't, sometimes the annual fee can be more than the Points and Perks, in which case you might be better off with a debit card.

Here are our tips for starting out flexing those credit muscles without being afraid of debt:

Use it like you would your debit card.

This is the most important point. Credit cards make money off you when you carry a balance. Here's how it works if you're unfamiliar: you charge purchases to your credit card during what's called your billing cycle, usually 30 days. Then, you get a statement at the end of that period, with a total amount you spent, and a minimum amount due. You have to pay the total amount you spent - called the statement balance - within the stated time (usually 30 days) or you start incurring interest charge. The rate they charge you is usually pretty high!

So how do you get around that? Always. Pay. The. Statement Balance. Ignore the minimum amount. It is a lie. It is not your friend. If you always pay the statement balance, you have effectively treated it like a debit card, but just deferred the payment for 30 days. On top of that, you get points or other rewards, paid for by the people who are carrying a balance!

This means, though, that you should treat every purchase as if it were coming directly out of your bank account as you make it. If you spend above your limits, you might get trapped paying interest. Pro Tip: set it to autopay every month from your bank account so you can set it and forget it.

Pick one with a low (or no) annual fee.

There are a bunch of cards that advertise lots of perks, boosts to gathering points, and heavy metal clanks when you hit them on a counter. These cards however, usually come with an annual fee, sometimes up to $550. If you're just starting out and aren't sure how to maximize your rewards, there are plenty of credit cards with a $0 annual fee. You can always upgrade later.

Pay attention to what points get you.

Not all points are created equal! Sometimes they're worth exactly one cent each when redeeming for cash, but 1.5 when redeeming for travel. Check the terms of what the card you're looking at offers, and make a plan for what you're going to use the points for. That way you can usually use the points the best way for you.

Don't forget the perks!

As we mentioned above, credit cards often come with tons of perks. On travel cards: Baggage delayed or lost by an airline and you had to buy some new toiletries? Card may have you covered. Get sick and can't make a flight? Card may have you covered? On cashback cards, purchase protection on credit cards often covers loss or theft within 90 days. Read the full list of perks and remember them when it comes time to use them.


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