Depending on what purchase you’re making, you might be wondering if you should use your credit card or your debit card. Although debit cards are good for ATM withdrawals and deposits, you should use your credit card for all other purchases.
Keep reading to learn about 6 reasons why you should use your credit card instead of your debit card.
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1. Credit Score
How high your credit score is plays a large factor in your finances, such as qualifying for a credit card or getting a good rate for a loan. When you use your credit cards correctly, you can help build or improve your credit. On the other hand, using a debit card won’t affect your credit score at all.
Check out these tips to improve your credit score.
2. Rewards
Credit cards offer many rewards that you can take advantage of. Even if you just have a simple, flat rate cashback card, you can at least earn something back from your purchases. Using a debit card won’t earn you any cash back.
Here are the best cash back credit cards.
3. No Cash Holds
When you check into a hotel room or rent a car, this usually requires a large deposit. Using your debit card will lock up a large portion of your money until after your travel is over. When you use a credit card, it will show up as “pending”, so you will still be able to access your cash.
TIP: Use your credit card for hotel, car rental and party rental deposits.
4. Fraud Protection
Credit cards and debit cards have very different rules regarding fraud protection. Below you will find a comparison between debit card fraud protections versus credit card.
DEBIT CARD FRAUD
- You’re responsible for up to $50 of unauthorized transactions if you report the card as lost or stolen within 2 business days.
- If you didn’t report the card within 2 business days, you could lose up to $500 if someone uses your physical debit card without your permission. You must report the fraudulent charges within 60 days after your statement is mailed to you.
- If you didn’t report the fraud within the 60-day window, you face potential unlimited damage if someone uses your debit card without your permission.
CREDIT CARD FRAUD
- You are not responsible for unauthorized charges if your credit card number is stolen.
- You won’t be held liable for more than $50 in authorized charges if your physical card is stolen.
TIP: You should use your credit card when shopping online and at restaurants, self-checkout lines and pay-at-the-pump terminals.
5. Travel Protection
From missed flights to lost baggage, there are many things that can go wrong when travelling. If you book your trip with a debit card, you’re pretty much on your own. However, using a credit card means you’re most likely covered with travel protection insurance.
TIP: Use your credit card to purchase airline tickets and make hotel and car rental reservations.
6. Purchase Protection
The majority of credit cards offer purchase protections, however debit cards to not. This may include extended warranty coverage, return protection and damage and theft coverage for recent purchases.
TIP: Use your credit card to purchase big-ticket items like furniture and appliances.
Conclusion
Although you might not want to use credit cards because you want to avoid racking up a large debt, there are many benefits of using a credit card that a debit card doesn’t offer. In order to not overspend, make sure you purchase things you know you can afford and pay your statement balance in full and on time.
Furthermore, be sure to check out our best credit card bonuses here.
