Why are credit cards preferred in the US?
There are several reasons why credit cards are popular in the US: On the other hand, debit cards do not have any of these going for them.  A debit card doesn't make much money for the bank unless you overdraw or something, so banks don't have incentive to push you to use them as much.  As a result they don't offer rewards other benefits. Some people say the ability to spend more than you have is a downside of a credit card.  But it's really an upside.  The behavior of doing that when it isn't needed is bad, but that's not the card's fault, it's the users'.  You can get a credit card with a very small limit if this is an issue for you. The question I find interesting is why debit cards are more popular in your home country.  I can't think of any advantage they offer besides free cash back.  But most people in the US don't use cash much either.  I have to think in your home country the banks have a different revenue model or perhaps your country isn't as eager to offer tons of easy credit to everyone as the US is. For me, it is mostly for the fraud protection. If I have a debit card and someone makes a fraudulent charge the money is removed from my bank account.  From my understanding, I can then file a fraud complaint with the bank to recover my money.  However, for some period of time, the money is missing from my bank account.  I've heard conflicting stories of money being returned quickly while the complaint is undergoing investigation as well as money being tied up for several days/weeks.  It may depend on the bank. With a credit card, it is the banks money that is tied up. "There are two things I can think of that might be different in other countries: Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via ""rewards"" points. Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well." Your question is based on a false premise. Debit cards are more popular in the US than credit cards are. Indeed it seems to be the non-US part of the world that is big in credit cards. See here for example "Personally, I use my credit cards for everything because I get reward points (or, cash back, depending on the card), and I build credit history. I've had credit cards since I was 18 (now 22), and my credit score is in the higher end 700s which I'm told is pretty good for my age. Additionally, since I put my rent and large purchases on my credit card, I have a lot of reward points. I use these to buy things I wouldn't normally buy to try them out and see if they bring any value into my life. If not, I didn't really lose anything, but I have found value in some of those things. I realize most of this is gamification and consumerism at play, but getting that extra little thing once in a while for ""free"" which is pretty nice." "The real reason credit cards are so popular in the US is that Americans are lazy and broke, and the credit card companies know how to market to that.  Have you ever heard of the $30k millionaires? These were individuals that purchased as if they were some of the wealthy elite, but had no real money to back it up. American society has pushed the idea of ""living on credit"" for quite some time now. An idea that is even furthered by watching the US government operate solely on credit. (Raise the debt ceiling much?) Live in America for more than six months and you will be bombarded with ""Pre-Approved Deals"" with low introductory rates that are designed to sucker the average consumer into opening multiple accounts that they don't need. Then, they try and get you to carry a balance by allowing low minimum payments that could take in the neighborhood of 20 years to pay off, depending on carried balance. This in turn pads the credit companies' pockets with all of the interest you now pay on the account. The few truly wealthy Americans do not purchase on credit." Credit card fraud protection (by law), credit card cash back programs (provided by most CC issuers), and debit card fees (commonly imposed by the merchant). The crux is that with CC transactions, a small percentage is remitted to the issuing bank.  Since the banks are already making money hand over fist on CC's, they incentivize people to use them. CC security is also lax because the merchant is responsible for fraudulent charges instead of the bank.  If the merchant fails to check a signature, they are held liable for all charges if the card holder reports a fraudulent transaction.
People have credit cards for various reasons depending upon their personal situation and uses  You don't need to have a Credit Card if you don't have a reason to. But most people do. If you are in the U.S., without credit cards, you probably don't have a credit history. Without a credit history, you won't be able to get a loan/mortgage, and even if you do, you'll get it on very unfavorable terms. Depending on where you live you might even have great difficulty renting an apartment. So, the most important reason to have credit cards is to have a good credit score. People have already listed other advantages of having credit cards, but another thing that wasn't mentioned is fraud protection. Credit cards are better protected against fraud than debit cards. You probably shouldn't use debit cards online unless you must. Also, without a credit card or credit history, some simple and important liberties like renting a car while you are travelling might be denied to you. So, in conclusion, it's bizarre, but in modern America you need credit cards, and you need them bad. A debit card takes the funds right from your account. There's no 'credit' issued along the way. The credit card facilitates a short term loan. If you are a pay-in-full customer, as I am, there's a cost to lend the money, but we're not paying it. It's part of the fee charged to the merchant. Thus the higher transaction cost. Early on, one might not be able to get credit for their business. For convenience, and the card perks, it makes sense to use the personal card. But for sake of a clean paper trail, I'd choose 1 card and use it exclusively, 100% for the business. Not one card here, one card there. You must understand that not everyone has or can get credit cards. Consider that those who are in the the lowest 20-30% of income tend to have fewer credit cards (or none), and lower credit debt, although some have quite high credit card debt relative to their income.  So you really aren't comparing the same demographics (the population of all income earners, used to calculate average income, and the population of all credit card debt holders, are not the same groups of people). Once you remove those folks from consideration, then credit card usage may still average higher, but accept that it is unusual for people making less than $20K-30K/year to have much credit card debt. You must understand that wealth and income are two very different (although related) concepts. One must note that there are millions of people in the U.S. who have wealth; they have net assets of over $1M (excluding their homes). Many of those folks have assets greatly exceeding $1M. And although it might seem foolish to carry a large balance on their credit cards, they may have quite low interest rates, and simply find it simpler and more convenient to use credit cards in lieu of personal loans.  Suppose you have $2M in net assets, and want to buy a classic car or a diamond necklace.  Charging $30K and carrying the balance until a dividend check arrives may make sense. Understand also that not everyone makes the same choices, or good choices. Carrying a credit card balance may appear like a poor choice, especially when you are not wealthy, or have lower income. But suppose you have a high credit limit across several cards, and you need to handle a short-term financial challenge (car repair, layoff, medical bills, etc).  You might use the credit card to pay for that purchase, essentially financing an extraordinary event over a longer period of time.  And although having a balance of more than 5-10% of your monthly income may seem foolish to some, it may make sense to others. And some people choose to carry balances of 50% to 100% of their credit limit.  Others realize that keeping their credit utilization below 30%, 20%, or 10% of the credit limit is a better plan (both interest rate and risk wise). One thing that has not been pointed out as a disadvantage of using Credit Cards:  people tend to spend more.  You can see This Study, and this one, plus about 500 others.  On average people tend to spend about 17% more with credit cards then with cash.  This amount dwarphs any perks one gets by having a credit card.   The safest way to use one is to only use them for purchases where you cannot make a decision to spend more.  One example would be for utility bills (that don't charge a fee) or at the gas pump. Using them at Amazon might have you upgrade your purchase or add some extra items.  Using them at restaurants might encourage you to order an extra drink or two.  Using them at the coffee shop might have you super size your coffee or add a pastry.   Of course this extra spending could lead you into a debt cycle exacerbating the financial hit many struggle with.  Please tread carefully if you decide to use them. A few reasons make sense: They have a defined process for rentals, risk assessment, and customer credit. Especially for a large corporation, making changes to that process is not trivial, adds risk/uncertainty, and will be costly. Such changes for a relatively small customer base might not makes sense. Many rental companies DO allow you to rent with a debit card. Why do some businesses take cash only?  With a debit card, there is no third party guarantee. With a credit card, the cash is coming from a well-established third party who will pay (assuming no disputes) and has a well-established history of paying. Even if the merchant holds your account, it is still your cash under the control of you and your bank until the deposit clears the merchants bank. It is not surprising they view that as more risk and potentially not worth hassling with debit. "I don't know, but I can guess. You'll notice the Elite card has higher rewards. A card might want to convince merchants that they represent high end buyers, and use that to negotiate higher merchant discounts. Issuing bank: ""Our 10 million card holders are sophisticated and have lots of discretionary income. If you don't agree to this rate, we'll terminate the contract and they will take their business elsewhere.""  Merchant: ""But it's twice the rate of everyone else! I'm sure these customers have other means of payment, and besides, how many of those card holders are actually using it?"" Issuing bank: ""Our cardholders signal their interest in the benefits of cardholding by paying us an annual fee. If they didn't want one, they'd stop paying right? They clearly know they have one and our records indicate they use them regularly. We're pretty sure if you don't wise up they'll shop at your biggest competitor, another client of ours. pause Frankly, they already do.""" My view is from the Netherlands, a EU country. Con: Credit cards are more risky. If someone finds your card, they can use it for online purchases without knowing any PIN, just by entering the card number, expiration date, and security code on the back. Worse, sometimes that information is stored in databases, and those get stolen by hackers! Also, you can have agreed to do periodic payments on some website and forgot about them, stopped using the service, and be surprised about the charge later. Debit cards usually need some kind of device that requires your PIN to do online payments (the ones I have in the Netherlands do, anyway), and automated periodic payments are authorized at your bank where you can get an overview of the currently active ones. Con: Banks get a percentage of each credit card payment. Unlike debit cards where companies usually pay a tiny fixed fee for each transaction (of, say, half a cent), credit card payments usually cost them a percentage and it comes to much more, a significant part of the profit margin. I feel this is just wrong. Con: automatic monthly payment can come at an unexpected moment With debit cards, the amount is withdrawn immediately and if the money isn't there, you get an error message allowing you to pay some other way (credit card after all, other bank account, cash, etc). When a recent monthly payment from my credit card was due to be charged from my bank account recently, someone else had been paid from it earlier that day and the money wasn't there. So I had to pay interest, on something I bought weeks ago... Pro: Credit cards apparently have some kind of insurance. I've never used this and don't know how it works, but apparently you can get your money back easily after fraudulent charges. Pro: Credit cards can be more easily used internationally for online purchases I don't know how it is with Visa or MC-issued debit cards, but many US sites accept only cards that have number/expiration date/security code and thus my normal bank account debit card isn't useable. Conclusion: definitely have one, but only use it when absolutely necessary. "A lot of credit card companies these days uses what they call ""daily interest"" where they charge the interest rate for the number of days till you pay off what you spent. This allows them to make more money than the ""period billing"".  The idea of credit, theoretically, is that there isn't really a day when you can borrow without paying interest - in theory" "Some features to be aware of are: How you prioritize these features will depend on your specific circumstances.  For instance, if your credit score is poor, you may have to choose among cards you can get with that score, and not have much choice on other dimensions.  If you frequently travel abroad, a low or zero foreign transaction fee may be important; if you never do, it probably doesn't matter.  If you always pay the balance in full, interest rate is less important than it is if you carry a balance.  If you frequently travel by air, an airline card may be useful to you; if you don't, you may prefer some other kind of rewards, or cash back. Cards differ along numerous dimensions, especially in the ""extra benefits"" area, which is often the most difficult area to assess, because in many cases you can't get a full description of these extra benefits until after you get the card.  A lot of the choice depends on your personal preferences (e.g., whether you want airline miles, rewards points of some sort, or cash back).  Lower fees and interest rates are always better, but it's up to you to decide if a higher fee of some sort outweighs the accompanying benefits (e.g., a better rewards rate).  A useful site for finding good offers is NerdWallet." The dollar is the reserve currency of choice because the full faith and credit of the US is big, liquid, and stable compared to any currently-available alternative.   The Euro and Yuan are big enough to displace the dollar (and maybe the Yen), but any fears about the dollar being subject to fickle whims of politics and policy are significantly worse with those options. There are numerous reasons that go beyond the immediate requirement for access to credit.  Many people just plain don't like carrying cash. Before electronic debit cards became mainstream about the only way to pay for online services was with a credit card.  This has now changed just about everywhere except a large number of airlines which still only sell online tickets via a credit card payment. And then there are all those countries where governments (and some banks) have decided to charge merchants more when customers use debit cards.  If you don't like carrying cash then you may find that the only card you can use is a credit card. These concerns are gradually disappearing and at some stage someone is likely to offer a combined debit-credit card. At which point you'll probably get credit whether you like it or not. If we're including psychological considerations, then the question becomes much more complicated: will having a higher available credit increase the temptation to spend? Will eliminating 100% of a small debt provide more positive reinforcement than paying off 15% of a larger debt? Etc. If we're looking at the pure financial impact, the question is simpler. The only advantage I see to prioritizing the lower interest card is the float: when you buy something on a credit card, interest is often calculated for that purchase starting at the beginning of the next billing cycle, rather than immediately from the purchase date. I'm not clear on what policies credit card companies have on giving float for credit cards with a carried balance, so you should look into what your card's policy is.  Other than than, paying off the higher interest rate card is better than paying off the lower interest rate. On top of that, you should look into whether you qualify for any of the following options (presented from best to worst): "In the end, all these fees hurt the average consumer, since the merchant ultimately passes cost to consumer. Savvy consumers can stay at par or get ahead, if they put in the effort. It's a pain, but I rotate between 4 cards depending on time of year and type of purchase, to optimize cash back. My cards are:  1. 5% rewards card on certain categories, rotates each quarter 2. 2% travel/dining card (fee card, but I travel a bunch so it's worth it, no foreign transaction fees) 3. 1.5% rewards card for everything else 4. Debit card (swiped as a CC) for small purchases (i.e. lunches) at credit union for ""enhanced"" high interest checking account, requiring certain # swipes/month. This alone returns to me ~$800/yr."