credit vs debit

Should You Use Credit or Debit? The Answer May Surprise You

Credit cards have long been treated as the scourge of the financial world. Too many people get far too overextended in credit card debt, resulting in financial struggle, poor credit ratings, and even bankruptcy. One of the first suggestions amateur financial planners make to individuals is to cut up their credit cards and live on a cash-only basis. However, using a credit card may not just be a good choice, it may be the best one.

Credit Cards Offer More Perks

When was the last time your debit card offered a cashback bonus? How many rewards points do you accrue from deducting money directly from a savings or checking account? If your answers are “never” and “none,” you are not alone. In fact, finding a debit card with any kind of earnings perks is like finding a needle in a haystack. There may be an occasional promotion from a bank, but they are often very small and short-lived.

On the contrary, credit card companies compete with each other every day. It is not enough for them to simply have you hold a credit card in your wallet; they want you to use their card for everyday purchases while shunning all others. They may do this by letting you accrue points that can be used to make purchases, cashback offers that can be applied toward your balance, or gift cards to various shops, restaurants, or even vacation destinations. These reward programs can vary greatly from company to company and card to card.

Credit Is Safer Than Debit

As more and more purchases are made online, there are more instances in which your fraud-protectionpayment data can be compromised. This is not a reason to avoid shopping; it is a reason to use a credit rather than a debit card. Most credit card companies have built-in fraud protection that will cover any unauthorized transactions. This means that if someone in Ohio buys three iPads using your credit card information, you will not be responsible for paying for them and your credit won’t be destroyed. Indeed, thanks to spending alerts, it may be your credit card company that alerts you to the fraudulent purchase in the first place.

The online world is not the only one in which credit card data can be compromised. Retailers like Home Depot and Target have suffered from breaches in their card reading systems. Whereas any credit card information obtained can lead to a worrisome hassle, if debit card information is stolen, your entire account can be wiped clean. If this happens, most people must brace themselves to face a lesson learned the hard way.

Credit Makes Traveling Easier

Filling up a tank of gas is less expensive than it was in the past, but most gas stations still put a significant hold on your account if you try to use debit or credit. As fewer people carry cash, it is most likely that tank of gas is accompanied by the swipe of a card. If you don’t have $200 in your bank account, you just may be out of luck. The same is true for car rentals, hotel stays, and various entertainment expenses. The companies that charge these holds do so to protect themselves. These account holds guarantee that you will be able to pay in case you overextend your rental, cause damage, or use more of a product than you initially intended.

Credit cards are even better if you plan to travel overseas. Debit cards may not be accepted at all, while currency exchanges can be confusing, to say the least. Though you do need to have some cash on hand while traveling in a foreign country, many of your hotel, transportation, and dining expenses are easily paid with a credit card. Just make sure yours has no foreign transaction fees before you travel.

Credit Cards Will Fight For You

If you are unhappy with your debit card, you can go through the trouble of switching banks and moving your accounts. If you are unhappy with your credit card, odds are pretty good that the company will do whatever it can to stay in your good graces. Sometimes this means lowering your APR or raising your spending limit. Other times they may offer an account upgrade, which gives you more perks. Some credit cards even offer free club memberships, gift cards, or cash that will be deducted from a future purchase. This is, of course, if you are in good standing with your company.

In order to keep your credit card from causing any financial problems, you simply have to remember two rules: Don’t spend more than you can afford and always pay on time. Treat your card like debit, but enjoy the rewards of credit. If you are able to master this, you will come out on top.

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