Debit Cards vs Credit Cards
Managing your money often comes down to how you play your cards. Should you deal your debit or your credit? This page takes a look at pros and cons of credit cards vs debit cards, so the next time you pay by plastic be sure to play your strongest hand. More...
Card Fees
Credit card fees have a habit of accelerating faster than NASCAR. If you have ever made a late payment on a credit card you will know that late fees can be anything from $35 upwards. Couple this with an over the limit fee of approximately $36 and your debt can soon soar into orbit. Paying by credit card means you must stay within limit and pay on time otherwise hefty fees become inevitable.
Debit cards meanwhile pose almost no risk of fees. Some banks were charging customers for the chip and PIN facility before they started to replace signing for purchases, but almost all banks have dropped this fee in recent times.
Result = Debit card.Fraud
The best way of fighting fraud it to let the fraudster spend someone else’s money. As strange as that sounds, that is exactly what happens when a thief uses your credit card – they spend the bank’s money. While never pleasant, it is the bank’s responsibility to refund the money providing they are satisfied you have been victim of credit card fraud. Which means your bank foots the bill for fraud.
Debit cards are a different ball game. If your debit card is stolen or used fraudulently you must inform your bank immediately to prevent the thief reaping havoc in your checking account. If you can prove that your card was used fraudulently through no fault of your own (ie you didn’t let someone borrow you debit card) your bank will refund all or most of the money.
Result = Credit cardEveryday purchases
Some have argued that using credit cards is a safer way to shop for everyday items such as a sandwich and a cup of coffee. Safer because using a credit card keeps your checking account out of harms way and reduces the chances of you exceeding an overdraft.
Debt Coach believes this is the same as stealing from Peter to pay Paul. If you can’t budget with your checking account, chances are you will not be able to budget with your credit card either. Yes, using a credit card can help you avoid any checking account fees should you exceed your overdraft or write a rubber cheque, but it could mean you lose control of your credit account.
Do what’s best for you. If you only use your credit card for small purchases and pay them off in full each month, then more power to you. If however you are struggling with mounting credit card bills, debit card is the daddy.
Result = TieWidely Accepted
You can use your credit card anywhere you see the Mastercard, American Express or Visa logo – which is just about everywhere. Credit cards can be used abroad just as conveniently as they are at home.
Similarly, you can use your debit card in almost every ATM, including those overseas. There are, however, two significant debit card disadvantages to consider. Firstly, your debit card cannot be used for electronic transactions when abroad on business or vacation and secondly, should you wish to hire a vehicle, the rental agent will insist on a credit card.
Result = Credit cardBorrowed bucks
As stated above when you use your credit card you are spending the bank’s money. For this reason, many people prefer to spend what is in their checking account instead of money that is effectively borrowed.
Result = Debit cardMake yourself at home in our Forum and find out what everyone else in America thinks about debit and credit cards. There is also our up-to-date News section for all the latest on personal finance. If you need help finding a provider or would like to review a company, please don’t go without checking out our A-Z directory.
