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When I’m at the checkout, I often open my wallet and pause for a moment, pondering how to pay. Cash? Nope, too hard to get that stuff, I’m saving it unless I’m buying a pack of gum.

So it’s often the debate between debit and credit card. The final tally, in many ways, is the same. I buy something, I have to pay for it, either now (debit) or later (credit).

But the decision is much more complex if you look at the bigger picture.

When Debit is Best

A debit card is the best way to pay for the majority of your purchases if you struggle with debt. If you’re one of these people, you should flat-out leave your credit card at home in a safe place and go debit. Or,  if money is a major issue, withdraw a set amount each month and pay for everything with cash to truly keep yourself in line.

Even if debt is not a serious monkey on your back, using your debit card for most of your purchases keeps you in a clean financial situation. You can check your bank accounts regularly online to be sure you don’t go into overdraft. When your account gets low, you stop spending and turn down that offer for a nice dinner out or resist hitting your favourite store until after the next payday.

Credit Card Perks

However, the modern world of credit cards has serious appeal. Now on the market are a slew of cards that allow you to build up points for travel, groceries, gas and more.

Cash-back cards are probably the most directly beneficial to those who want to leverage their credit card use for benefits. Almost all the major Canadian banks offer cash back Visas or MasterCards, many with no annual fee. The MBNA Smart Cash Credit Card offers up to 5% cash back on gas and groceries for the first 10 months, and then a very competitive 3% after that (all other purchases will get you 1% cash back). The Scotia Momentum Visa Infinite is another great cash back card, offering 4% cash back on gas and groceries, 2% cash back on recurring payments and drug store purchases, plus 1% on everything else.

As with all credit cards, read the fine print. Make sure redeeming your cash points is easy, and that some of the great offers (low interest, a higher percentage cash back) don’t expire after just a few months. And since most cards offer big points or cash for your first purchase, activate the thing at a good time, such as when you’re paying for a vacation or a big electronics buy.

Better Security

For me, since I have no rewards on my card, a credit card is ideally suited for those big purchases when I want a team at my back.

Many cards offer some insurance for your purchases (read the fine print of course). But even if your card does not, if you do buy say a large TV and it never works and the retailer gives you a hard time, you can go through your credit card company to get your money back. Remember, these retailers have accounts with your credit card company too, and they can be refused money or lose the account.

But cards with more features offer specific kinds of insurance for travel, purchases and more. Keep this in mind whenever you buy and don’t be afraid to call on your credit card company when things go wrong.

Another huge benefit is if you are the victim of a financial crime, you're better off having that crime take place with your credit card. Card companies are amazing at not making you pay when there are iffy purchases from a card that's physically stolen or your info is stolen.

Build Your Credit Rating

The best way to build your credit score, bar none, is to regularly use a credit card and pay it off every month. If you’re coming out of a bad credit situation, or you just don’t have any credit history, a credit card is where you want to put more purchases.

If you struggle to get approved for a card, you can build credit by applying for a store credit card or a secured credit card. Store credit cards can be easier to get and while they charge large interest rates, having such a card will allow you to build up your rating and eventually get accepted for a more traditional card (if you pay it off on time!).

As well, banks and credit card companies offer so-called secured credit cards. They allow you to put money down (say $500) and borrow off that deposit. Clearly, these aren’t as great to have as a regular card, but this type of card is a more popular and prudent way of building your creditworthiness.  They also allow you to do things like buy online or purchase airline tickets; two things that are somewhat impossible without a credit card. Check out products like the No-Fee Scotiabank Value Visa Card or the Capital One Low Rate Guaranteed Secured MasterCard.

The Debt Card versus Credit Card Debate is a Personal One

Wherever you go, it makes sense to have both your debit and credit cards on hand. But what you choose to use should be more about the reality of your money situation than the rewards behind the card.

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