Credit to Debit: Should You Make the Switch?

When it’s time to reach in your wallet at the checkout stand, do you choose credit or debit to pay for your purchase? Perhaps you hesitate to take out your credit card and instead use your check card to debit the purchase. With credit cards, you have to worry about paying interest, which can add up over time. However, before you rule out using your credit card, consider that it may be to your advantage to select the credit option for your next purchase at the checkout stand.

What’s the Difference?

Debit and credit cards accomplish the same thing: they provide the convenience to make purchases without having to carry checks or a lot of cash on you. Behind the scenes, though, is where you’ll the find difference between a debit card and a credit card. Your check card, or debit card, is linked directly to your checking account. When your debit card is swiped, within minutes, the money is taken directly out of your checking account. A credit card, by contrast, uses funds that you don’t have. The credit card company loans you the money for the purchases you make. You are sent a monthly bill that details all the purchases you have made and the interest that will be charged if you do not pay off all the charges usually within 30 days. What makes the credit card so great if you’ll be charged to make a purchase?

Security

There is added security when you use a credit card. When making a purchase, you will be asked to provide identification before the cashier will swipe your card. You will also need to sign the receipt, acknowledging that you agree to the purchase. Debit cards do not offer this added security. All you need is a 4-digit personal identification number (PIN). Criminals are now able to steal these PINs and gain access to the funds in your account even if they don’t have your physical card on hand.

Liability

In the event your debit card PIN is compromised, your liability for the fraud is $50 if you contact your bank within 2 days of the money's going missing. If you don’t notice the fraud until after 2 days, your liability increases to $500. After 60 days, your entire account balance could be at stake. With your credit card, you can be held liable for only $50. Strict liability laws regulate credit card companies. This includes the obligation to investigate a reported fraud on your account. You have 60 days to submit a written request for investigating fraudulent charges. For debit card fraud, there are no federal laws that will limit your liability.

Rewards

Most credit card companies will offer you rewards after you have earned a set amount of points on your card. When purchases are made with the card, you earn points. The more you use your credit card, the more points you’ll earn.  These points are like free money, or cash back, that can be spent anyway you choose. Other incentives like travel and college fund rewards are benefits you can receive when you make purchases with a credit card. Debit cards do not have any rewards associated with them.
   
As long as you are responsible with your spending, credit cards offer the same benefits of a debit card and more. To avoid paying interest on your purchases, pay off the card balance on time every month. This also helps to build your credit history and increase your credit rating.

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