Making purchases are easier than ever nowadays. All you have to do is swipe a card or enter in a few digits online and check out! However, the question being asked here is whether or not it’s better to pay with your debit or credit card.
To answer this question, we must take into account all of the pros and cons to both sides. Almost everyone has ditched cash and went with the preferred method of plastic cards. Are you looking to open up a credit card soon? Before you do so, consider reading on if you are interested!
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Pros of Debit Cards
- No debt: For many, the appeal of debit cards is that you don’t go into debt when using them. They limit spending to what’s available in your checking account. Your card will just stop working when you run out of money unless you sign up for optional overdraft protection, which is helpful if you have a hard time controlling your spending. There won’t be any interest charges each month.
- Costs you pay: Using debit cards is inexpensive as well. They don’t charge the annual fees credit cards sometimes do. Some checking accounts charge maintenance fees if you don’t qualify for a waiver, but a checking account is practically a necessity. If you need cash from an ATM, you’ve got a good chance of getting it for free with your debit card, but credit card cash advances are notoriously expensive.
- Costs merchants pay: Debit cards can also be inexpensive for retailers. Merchants pay fees to process your payments, and debit card swipe fees are typically much lower than credit card fees. As a result, some merchants require you to meet minimum purchase thresholds when you use a credit card.
- Simplicity: Your debit card comes with your checking account, and adding a credit card to the mix is just adding a layer of complexity to your finances. That’s one more username and password, another card number that can get stolen, and an extra payment you need to stay on top of each month. Your debit card will work almost everywhere a credit card works.
- No credit needed: Debit cards are easier to get if you have bad or low credit. If you can get a checking account, you can get a debit card. Whether you don’t like the idea of debt or you can’t get approved for debt products, debit cards let you steer clear of credit cards.
Pros of Credit Cards
- Less risk: When you use a debit card, the money comes out of your checking account immediately. With a credit card, you spend the bank’s money, and you have a grace period before payment is due. That gives you more time to notice errors and dispute them, while keeping your checking account intact. Credit cards also offer better protection against fraud, although most debit cards with voluntary “zero liability” coverage are similar. With credit cards, you can’t lose more than $50 to fraud, but with debit cards, your liability is potentially unlimited under federal law.
- Additional protection: While zero liability policies make debit cards almost as safe as credit cards, credit cards offer additional benefits. It’s easier to dispute charges if there’s a problem, and some credit cards offer extended warranties on items you purchase as well as limited travel insurance.
- Build and maintain credit: Keeping a credit card account open helps you build a strong credit history or keep your credit in good shape. Debit cards, for the most part, do not affect your credit. Some die-hard debit card users say they don’t care about credit scores because they’ll never need to borrow, but those scores are important. You might want to borrow someday and starting from scratch is hard. You won’t pay any interest charges if you pay off your credit card balances in full every month, and some cards have no annual fees, so there’s little to lose.
- Rewards: If you’re the type who wants a little extra, credit cards offer better rewards than debit cards
- High limits: Credit cards often come with limits that are greater than the amount of cash you keep in checking. As a result, you don’t have to worry about hitting your limit due to authorizations and holds. You’ll have fewer problems using your card for rental cars, hotels, gas at the pump, and dining (where pre-authorization holds lock up funds for several days, whether or not you pay with the card).
- Other benefits: Depending on your situation (and your card issuer), there may be other benefits to using credit cards. For example, at some rental car agencies, a credit card is the only acceptable form of payment.
After all of this information, I’m sure you’re looking for an answer to the question asked above. There is no definitive answer because it is all based on what you are using the card for.
However credit card is best for most purchases because it protects you in several ways that a debit card can’t when shopping online or in-person. A debit card is best for cash withdrawals and debt avoidance. For cash withdrawals at ATMs, your debit card is the best option. You’ll keep fees at a minimum, and your card information is unlikely to get stolen if you stick to safe ATMs. If you know you will create a mountain of dept on a credit card, it’s best to stick with a debit card.
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