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How to choose between debit and credit

When to use a credit vs. debit card
When to use a credit vs. debit card

It's never been easier to put it on plastic, but choosing between credit or debit is a bit more difficult.

Credit cards are still considered the best way to begin a credit history, which is important. Good credit paves the way to low interest rates on mortgages and auto loans, and can even make it easier to get an apartment rental.

You can also reap some serious rewards with credit cards. Competition for new cardholders is fierce, and as a result many lenders have upped the ante with incentives and sign-up bonuses.

In addition to cash back on charges for gas, groceries and restaurants, six credit-card issuers now offer upfront rewards of more than $1,000 to entice creditworthy people to open new accounts, according to a recent survey by Historically, that is the most issuers ever to provide four-figure, sign-up bonuses.

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Additionally, you may get purchase protection or an extended warranty on a big purchase. Some cards will also offer to reimburse you on items that are defective, damaged, lost or stolen.

Booking travel? Hotels often put a temporary hold on debit cards when you make a reservation, so a credit card makes sense if you don't want to tie up those funds in your checking account from now until Christmas.

But according to a report from analyzing 100 major cards, the average card also carries half a dozen fees, which most consumers would rather avoid.

Alternatively, debit cards give you quick access to cash with no interest, no worries about impacting your credit score — and can sometimes help curb your urge to overspend.

Since debit cards are linked to a checking account, they act as a defense against overdrafts, which can help build good habits.

They are also a better choice for those who can't afford to pay their credit card balance in full each month or have a tendency to pay bills a little late. Not only are you forced to limit spending to the money you have available, you won't rack up hefty interest charges or late fees in the interim.

So until you're able to manage your bills, stick to debit — or better yet, try a third option: cash.