When to Use a Credit Card Vs. Debit Card
Debit cards have taken over credit cards. So when should you use your credit card vs. your debit card. Like most things in life, it depends.
When to Use a Credit Card
You want to use a credit card when making big ticket purchases such as a HD TV or computer, especially if you are making the purchase online. If there is a problem with your purchase, you can contact your credit card company to withhold payment. With a debit card, the money is deducted from your checking account immediately and it may take days or weeks to resolve the issue with the merchant.
Credit card companies such as American Express add up to 1 year to the manufacturer’s warranty on products you buy using their credit card. You may also get additional protection from theft, damage and identity protection. Many credit card companies also offer 24 hours roadside emergency assistance, travel insurance, car rental loss and damage insurance.
When using a debit card for some hotels, restaurants, car rental companies and gas stations, a hold maybe placed on money in your checking account until the debit transaction is processed. This may take up to several days for signature-based payments. The amount that’s held may be much more than the amount of your purchase. The money held can prevent you from accessing the money in your account and could result in bounced checks, declined transactions or overdraft charges.
Earning Rewards
Very few debit cards offer reward programs and if they do, the reward programs are not as good as credit cards. Using debit cards will not maximize your cash back or points you can earn. However, credit card rewards tend to have the highest interest rates, so if you don’t payoff your balance in full each month, don’t use a reward credit card.
Your Liability
Per federal law, liability for fraudulent charges on debit cards can be greater than it is for credit cards. You are responsible for up to $50 for fraudulent purchases on your credit card, however, for your debit card, you can lose up to $500 if you don’t report the loss or theft of your card or PIN with 2 business days of finding the problem. Additionally, if you do not report the fraudulent charge within 60 days of the date of the statement that lists them, you maybe held liable for any unauthorized withdrawals after that date.
MasterCard and Visa offer “zero liability” policies that is beyond federal law by exempting debit cardholders from liability in most cases when a bank investigation confirms a transaction is fraudulent. However, there are loopholes in those policies that may allow people who create fake ATM or debit cards by stealing your PIN and other account data to simply pull cash from your bank account. By using a scheme called “skimming”, they use equipment to capture the magnetic-stripe and keypad information when you enter your PIN at ATMs, gas pumps, restaurants, and retailers.
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