Millions of American consumers, if asked, will expound on the advantages of using a debit card, including the fact that it’s handy, saves them from not carrying around large amounts of cash in their pocket and helps them to not overspend.
On the other hand, using a credit card has a number of benefits that, in some cases, outweigh the benefits that using a debit card has. We put together the Top 5 reasons in today’s blog. Enjoy.
Reason #1: Protection from Fraud
Let’s face it, there are a lot of crooked people around who steal credit cards on a daily basis. One of the best things about using a credit card however is that the federal government has protection laws in place for consumers to make sure that, if their credit card is stolen and used illegally, they don’t have to foot the bill.
If, for example, your stolen card is reported before a purchase is made, you won’t be liable for any unauthorized use and, if not, you’re only on the hook for $50 worth of any fraudulent transactions.
With a debit card, funds are typically withdrawn directly from your bank account. What that means is that, if a thief gets a hold of your debit card, they can steal thousands of dollars before you even realize that your card is stolen and “freeze” your account. After two days the amount of money you’re liable for is $500 and, after 60, you’ll be responsible for everything that was stolen.
Reason #2: Renting a car or booking a hotel room is much easier
While it’s true that you can rent a car or make a hotel booking with the debit card, the fact is that they both will place a hold, usually in the amount of a few hundred dollars, on your debit card in order to do it. Depending on how much money you actually have in your bank account, this might be a problem as it “freezes” that money and you won’t be able to use it.
With a credit card they do something similar but, since the money isn’t actually taken out of your bank account, all of the money in your account will still be available.
Reason #3: You can use a credit card to build your credit history
Using a debit card has obvious benefits but, in most cases, it won’t help you build a credit history. A credit card will however and, if you use your credit responsibly and pay your bills on time, keep your credit-ratio low and don’t overspend, your reward will be better interest rates when you go to get a mortgage or car loan and even on new credit cards as well.
Reason #4: Credit cards help you to avoid many fees
Using a debit card means, in many cases, paying for swipe fees on individual transactions and, if you use more money than you have on your card, overdraft charges from your bank. If you use a credit card you can avoid many of these fees.
Reason #5: you can get Rewards points with a credit card
Frankly, as long as you pay your balance in full every month and don’t overspend, you can stay out of debt using credit cards and, even better, get rewards that you can use to purchase other things, get frequent flyer miles and so forth. In fact, some credit cards have fantastic reward programs and, if you don’t use credit cards, you’ll never be able to take advantage of them.