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Can Your Debit Card Beat Up Your Credit Card?

Aug 27, 2008
There is a debate about whether it is better to use a debit card or a credit card. Both offer benefits and each card has its merits. Let's first look at the merits of a debit card.

1. The major benefit of a debit card is the fact that when you spend money with it you do not have to pay interest. The money is immediately taken out of your checking account and no debt results.

2. You do not have to carry cash or checks. Debit cards are widely accepted now and even bear the VISA or MasterCard symbols. In fact the merchant will ask you if it is debit or credit. You can say credit just to avoid having to enter your pin.

3. For the first time in 2006 credit card usage actually took a back seat to debit card usage. Their popularity has increased and consumers appreciate the added convenience. If you like being part of the majority then debit cards are the way to go.

With debit cards surpassing credit card usage why would you still want to use a credit card? People who have run into problems with credit cards are shy and may prefer a debit card. Here are some benefits of using a credit card instead of a debit card and they have everything to do with consumer protection.

1. Credit cards have much stricter liability laws. If you lose your debit card an unscrupulous individual can drain your entire checking account in a matter of hours. Besides the obvious loss of cash this can also lead to bounced checks and overdraft charges.

With a credit card though, your losses are limited to $50. In addition, almost all credit cards also have 0 liability policies. With a debit card your liability is $50 if you discover the loss and notify your bank within 2 days. For the next 58 days your liability increases to $500 and then your entire account if the loss is undetected past 60 days.

2. The loss of a debit card can also lead to identity theft issues. On average a consumer spends $1,200 and countless hours trying to restore their identity.

3. When purchases are made with a credit card there is consumer protection. If items are stolen within a limited time frame (usually 90 days), most of the time you get your money back.

4. Added insurance accompanies purchases with a credit card. There is usually also an automatic death benefit for purchasing airline tickets with a credit card. It is also easier to chargeback items.

In conclusion, if you are able to control your spending the credit card offers far more benefits. Consider using a credit card and paying it off each month. You get all the benefits of both and 25 extra days to pay. Some of the ideas in this article were taken from "How to profit from credit cards" by Curtis E. Arnold.
About the Author
Zach Allred is a tax accountant with a desire to provide tips about good credit card practices. You can visit his site to compare credit cards before completing an application.
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