As a dad, I’m not only concerned about my own spending habits, but I want to help my kids learn to be wise financial stewards. One question that has come up in our house and often comes up with folks when we are talking about finances is the credit card versus debit card debate.

Which is better? The answer is it depends. There are times when using a debit card is probably a bad idea, particularly if you don’t have a lot of cash in your account. For example, if you are checking into a hotel, in addition to the actual costs you will incur (such as the nightly room charge), the hotel will sometimes estimate incidentals (minibar, room service) and put a hold, or “block,” on enough cash to cover those possible expenses. Then, you don’t have access to that money in your account until the block is removed. Gas stations have been known to do something similar if you use a debit card at the pump.

Credit cards, on the other hand, are dangerous if you charge more than you can pay when the monthly bill arrives. With a debit card, you can’t spend more than you have. With a credit card, you are only restricted by your credit limit. Since Americans have a collective credit card debt of over $823 billion, John Otter writes in Worth It…Not Worth It (a book I highly recommend), “So if you can’t control your spending, you may be better off cutting up those credit cards and sticking to cash and debit. Then you can’t spend money you don’t have.”

That’s the real key, isn’t it? Don’t spend more than you have. When you pay interest on your credit card, you’ve just increased the cost of whatever you purchased. In fact, I hate debt so much, I recommend staying away from debt for everything but your home and education. Even then, you need to be careful. So, when it comes to credit vs. debit, the most important thing is to live within your means. Remember, “For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs.” (1 Timothy 6:10)

The Bottom Line

If you will pay your monthly credit card bill in full and on time, use credit. If not, stick to debit.