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Community Corner

Five Reasons to Use a Credit Card Instead of a Debit Card

When you use a debit card, you use money right from your bank account. But with a credit card, there are advantages to borrowing money and paying it back later.

1. Fraud Liability

If someone steals your card, by law, you only have to pay $50 for any credit card transactions that weren’t made by you.  For debit cards, however, you must notify the bank within two days to pay only $50, but after that, it can increase to up to $500.

2. Blocking

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When you rent a car or a hotel room, many companies charge you more than what you’re supposed to be paying (which puts a block on your card).  This way, if you’re responsible for something going wrong, they can justify charging you more.  If nothing goes wrong, you should get the money back – but it may take a few days.  If you use your debit card, this limits the amount of money in your bank account.  But if you use a credit card, your bank account won’t be directly affected.

3. More Protection

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When you purchase something that will be delivered to you, use a credit card.  That way, it gives you an added insurance in case your purchase is damaged when you receive it.

4. Credit Building

With credit cards, you can build or reestablish your credit history.  If you’re a responsible credit card owner, you improve your credit rating (which leads to things like lower interest rates and the ability to take out a loan or buy a house).

5. Overdraft Fees

When you use a debit card, it’s easy to forget how much money you’ve pulled out of your bank account, and many banks let your debit transaction go through even when you have insufficient funds.  This way, they can slap you with an overdraft fee (and these can add up).  With credit cards, it’s much harder to go over the spending limit.

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