How do you answer this question: Debit or credit? Research shows that half of all North Americans prefer using their debit card to make purchases, but according to ABC News, there are times when using a credit card makes more sense. For example:
•If the credit card comes with a rewards program, which gives you incentives like airline miles or cash back. Peter Garuccio is a spokesman for the American Bankers Association, and he says if you manage your money well, and know you’ll pay off your balance every month, use your credit card as much as possible to get the rewards.
•Another good time to use credit: If you’re buying something expensive. Why? Because unlike debit cards, credit cards provide protection. If the item’s damaged or doesn’t work – and the merchant’s unwilling to give you a refund - your bank can negotiate with the store for you, and cancel or reverse the transaction.
•If you buy something online, use a credit card. If the item’s lost or stolen in the mail, or if the seller sends you the wrong item - or doesn’t send it at all, your bank can refuse to pay them and credit your account.
Garuccio points out that when you use a debit card, the transaction is complete when the merchant receives payment. After that, you’re on your own, and most banks won’t bother to help you get a refund. One exception is Visa, which offers the same dispute rights with debit cards as for their credit cards. If someone uses your Visa debit card to make an unauthorized purchase – even online – you won’t be held responsible.
So, is there ever a time when it’s better to use debit instead of credit? Yes – if you’re not good at managing your money. That's because a debit transaction won’t go through if you don’t have the money in your account. According to the Center for Responsible Lending, a lot of people simply avoid pulling out their credit cards because they don’t want to get over their heads in debt.
