Five Reasons Credit Cards Are Better than Debit Cards

Many people prefer to use debit cards over credit cards.  They say that debit cards are accepted just like a credit card, so they do not need a credit card.  They are more concerned about the fees and charges associated with a credit card account and like to avoid those completely.

However, there are some things that you need to be aware of with debit cards that can hurt you if you do not know about them.  These are given in no particular order:

1.    Limited to account balance.  If your debit card is tied to a checking account, you are limited in your purchases to the amount in your account.  You can incur over-draft charges if you try to use the card for an amount that is over what you have in the account.  Also, some banks are now beginning to charge over-limit fees as well.  You need to find out the details on what your bank charges so that you know what could potentially happen to you if you get into one of these situations.

2.    No coverage for fraudulent use by others.  If your card and pin number is stolen, the bank will not help you other than give you a new card and number.  You are responsible for the amount that was charged against your card and ultimately against your account.  You are also responsible for reporting the abuse to authorities to see if they can help you track down the person(s) responsible in order to get your money back.  This can be a time-consuming and difficult thing to accomplish; especially with the amount of cases that are being attended to by local police.

3.    No rewards programs.  You miss out on some very beneficial rewards programs like cash back bonuses, points for airline miles which can be used for booking rooms and obtaining rental cars.  If you are a business person who travels a lot, then these types of rewards can keep your business costs down.

4.    No help for purchases.  If you have made a purchase and the item does not live up to its billing and/or promises, you are on your own as to making the place from which you made the purchase stand good for it.  With credit cards that offer this service, they will go to bat for you and get items fixed or replaced with little or no hassle.

5.    No building up of your credit score.  You will not build up your credit score with a debit card.  Yes, you can use it for online payments of your other credit cards, but it does nothing to add to your credit and keep you in good standing with your accounts.  The debit card is mainly benign in this area.  It is much like a check would be that is written on your account only it has more convenience and acceptability.

While debit cards have their place, they are limited in what they can offer the holder and the negatives are those which create concern to the card holder.  Is it unwise to have one in your financial arsenal?  The answer is ‘no’ but be aware of the limitations and use them only in the situations and circumstances that they are best fit.  These might include paying of bills and cash retrievals from ATM machines.

Keep in mind that because of their limitations and potential impact for loss because of fraud, you are better off not using them for any travel related activities that involve flying, paying for hotel/motel rooms and/or renting vehicles.  Your best option there would be to obtain a credit card for these purposes.

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This entry was posted on Friday, March 27th, 2009 at 6:04 am and is filed under Credit Card News, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.