Examining your 2017 finances, reevaluating your budget, and deciding on your financial strategies for the upcoming year are all excellent things to do right now. Using debit or credit is one decision to make.
Why Credit Cards Are Better
Credit cards come with a lot of benefits. The first is that compared to debit cards, credit cards provide better fraud protection.
According to the Fair Credit Billing Act, credit card businesses are required to provide their cardholders with fraud protection. That equals zero liability for many credit cards.
This is how it goes. You are not liable for any fraudulent charges if you report a lost or stolen credit card before it is used or if the number only—and not the actual card—is stolen. Your responsibility is limited to $50 if you report a loss or theft after a charge has been made.
The regulations are a little bit more intricate for a lost or stolen debit card. You are not liable for any erroneous charges if you report the loss before they are processed. Your obligation is limited to $50 if you disclose the loss within two days of becoming aware of it.
You may be liable for up to $500 in fraudulent charges if you don’t disclose the loss within 60 days of the mailing date of the statement on which the fraudulent charges appear. You can be responsible for the entire bill if you don’t report the loss within that time frame. If you report fraudulent charges within 60 days of the statement mailing date, you are not liable for them if the number but not the card is taken.
On debit cards, card issuers might provide more lenient liability protection. Zero responsibility, for instance, on transactions involving signatures.
The rapidity with which returns are handled is the next benefit provided by credit cards. You often notice the statement credit for returns made with credit cards within a few days. Depending on the merchant and the banks involved, you could have to wait a week or more before the money is returned to your account if the item was purchased with a debit card and the money has already been transferred to the seller.
When it comes to benefits, credit cards typically have an edge over debit cards, such as superior rewards programs, travel advantages, or exclusive access to products and services.
Credit cards can help you establish a strong credit score and profile, which is one of the major benefits of using credit over debit. Your credit report does not include debit cards. To prevent harm to your credit score, use your credit card wisely (pay all bills on time, and keep your balance low).
In Defense of Debit Cards
Debit cards are great because they help you stick to your spending plan. Your checking account is linked to the card, so if the funds are depleted, you are unable to make any purchases. On the other side, credit cards invite you to spend more money than you can afford to pay back. You avoid the surprise of a hefty charge at the end of the month thanks to debit cards.
Debit cards don’t have yearly fees, thus getting one is free.
Debit cards are equally as safe as credit cards, and banks in the United States are currently implementing EMV chip debit cards, which provide better fraud protection.
It may be less expensive to use debit cards than credit cards. Due to the higher processing costs associated with credit card transactions, many businesses may offer savings if you pay with your debit card. The petrol stations under the AMPM name do not, in fact, accept credit cards at the pump. Only by debit.
In some circumstances, you might work out a better deal with a retailer by choosing debit over credit. Debit cards can thus be used to make larger purchases than credit cards.
Depending on the bank, you might also be able to save money on your banking expenses. If you make a particular number of debit purchases each month, some banks will forgo their monthly checking account fees.
Signature or PIN for debit cards?
You may be given the choice to sign for a debit card transaction or to finish it with your PIN in some circumstances. You most likely need to sign in order to earn points on your purchases if you have a debit card that can do so (not very popular these days). You won’t be able to obtain cash back if you use a signature, even from a business that rewards PIN transactions with cash back.
Additionally, since signature transactions could incur higher fees from the bank, the shop might require a PIN instead or charge you for the transaction. Finally, it could take longer for a signature transaction to post to your account (depending on the merchant and how their bank processes the transaction). PIN transactions typically appear in your account balance immediately following the sale.
Swipe or dip your card and choose “credit” if you do wish to complete the purchase without a PIN and instead with your signature (or ask the cashier to select credit).
Tips for Shopping and Credit
Whatever mode of payment you choose in 2017, never forget that living within your means is the key to achieving financial success. Limit the amount you charge to what you can afford to pay when the bill comes. Making and adhering to a budget is the only way to move ahead or make headway against debt.
Monitor your accounts (debit and credit) throughout the year to keep track of your balances and promptly identify any shady activity. Use Credit Sesame’s free or paid credit monitoring service to keep an eye on your credit score and the information on your file for even more security.
