Most Americans have both a debit card and a credit card in their wallet. But which one is the better option when making a purchase? In the purchasing battle, credit comes out on top in almost every situation. Read on to find out why you should choose credit over debit.
Protection Against Fraud
Credit cards offer protection on fraudulent charges so if someone stole your credit card number, you would be reimbursed for the charges you didn’t make. Banks don’t offer unlimited protection on fraudulent charges or offer protection on a limited amount. Any money spent or withdrawn using a debit card is cash lost almost instantly. Most credit cards also offer a no liability policy in the event that fraud occurs. Online shopping offers increased opportunity for fraud, which makes using a credit card the wiser choice.
Restoring and Building Credit
If you have no credit history or have a history of bad credit, using a credit card responsibly is a good way to establish good credit. Debit card purchases are seldom reported to credit reporting agencies, and thus will have no effect on your credit history.
When using a debit card, there is always a danger of spending more than you have in your bank account, which usually results in expensive fees each time the account is over-drafted. With credit cards, you’re not spending money in “real time” so overdraft isn’t an issue. There is always the possibility of going over your credit limit, if you’re not mindful of your purchasing. However, this is easier to avoid since the limit is static and there are precautions you can take (like email or text notifications) to warn you when you approach the limit.
Many credit cards offer perks such as extended warranties, roadside assistance, and insurance on purchases. The only catch is that you have to use your credit card to make the initial purchase in order to get the perk. (You should contact your credit card company to find out the specific perks your credit card offers, which differ from card to card.)
In our opinion this is the #1 reason to choose a credit card over a debit card. What other form of currency allows you to actually make money while making purchases? Using a reward credit card consistently and responsibly allows you to rack up tons of reward points good towards travel, airlines, goods, services, and actual cash. Thus, using a reward credit card always trumps a debit card, when used responsibly.
To make sure you’re reaping the full benefits of using your credit card over your debit card, pay your credit card balance in full each month and use the Reward Summit app to make sure you are racking up the most reward points with every purchase.