This Is When You Should Use Your Credit vs. Debit Card
We’ve all heard a cashier ask “debit or credit?” hundreds, even thousands of times. (Just depends how shopping-obsessed you are — guilty!) Chances are, you’re someone who reaches more often for one than the other. There are certainly times and places for each, but according to experts, credit is king for most expenses, including, say, holiday airplane tickets and Cyber Monday buys. But don’t go cutting up your debit card just yet. Kevin Gallegos, Senior Vice President of New Client Enrollment at Freedom Debt Relief, gave us the scoop on when to swipe each of our trusty plastics.
Use Your Credit Card…
1. To Splurge on Significant Purchases: You can benefit from using your credit card when making expensive purchases on items that often have a warranty available, such as electronics. According to Gallegos, many of these warranties can be extended if a credit card is used for the transaction. (Check your credit card’s benefits!)
2. To Shop Online: Online shoppers should stick to credit to stay safe. “A credit card is a better choice to use for online purchases as it offers greater protection against fraud,” Gallegos tells us. “If you need to dispute a transaction, you can report it to the card issuer. You are not liable for the charge until the dispute is resolved.” For added security, he suggests keeping an eye out for the secure page symbol at the bottom of any online vendor from which you’re looking to buy.
3. To Pay for Expenses Related to Travel and Transportation: Think gas, rental cars, hotel reservations: In these situations, credit cards are ideal, Gallegos explains, because “some vendors place a temporary hold on a debit card called ‘blocking’ to make sure the funds are available. This means an amount greater than your purchase might be unavailable to you for several days if you use a debit card.” Also, credit offers an extra layer of security when traveling. If your card is stolen, you can simply call the company to cancel the account.
4. To Build Your Credit Profile and Score: Even small purchases (yes, we’re talking about that daily iced coffee and croissant) should go on your credit card. According to Gallegos, building a good credit score in part entails making small purchases on a credit card and repaying the full balance on time each month. “Responsible use of credit shows that you can manage and repay debt,” he emphasizes. Debit cards, on the other hand, do not, since they only draw on funds you already have available.
Use Your Debit Card (or Cash)…
1. To Keep Spending in Check: Impulse spenders, you might want to consider using your debit card more than your overly careful counterparts. “With a debit card, you can’t spend yourself into a hole,” Gallegos says, “unless you have overdraft protection, which you must opt in for.” The embarrassment of a declined card or a single overdraft fee can be worth it to prevent yourself from spending a bunch of money you don’t have.
2. To Get a Discount: Sometimes old-school cash really can come in handy. “Paying cash sometimes provides a discount,” Gallegos reminds us. “If you have been responsible and saved up money for a new piece of furniture or car, for example, you might be able to get a better deal by offering cash.” Look for these deals at small businesses, specifically.
At the end of the day, these decisions really are up to the individual consumer. “Whether you use debit or credit or cash, the key principles of financial freedom remain constant,” advises Gallegos. “Always remember to live within your means, pay all bills on time, build your savings, and avoid debt — especially credit card debt.”
So, debit or credit? Tell us why @BritandCo.
(Photos via Getty)