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Credit or Debit: There is a Difference

If you think about how much modern civilization depends on small pieces of plastic for everyday survival, it’s pretty strange. Most of today’s population, in many “developed” parts of the world, rarely carry cash because of the convenience credit and debit cards offer.

Armed with our arsenal of plastic, ready to make a speedy purchase, we are all confronted with the haunting question: Credit or Debit? The average person doesn’t particularly care, some opt to use their debit cards for the ease of accounting. Others, who may be low on cash, opt to use credit cards instead. Then there is another, more thoughtful segment of the population that gives this question the attention it deserves and chooses their payment method based on some very real variables. Food for thought…

Creditworthiness

We all know that the content of our character is first judged by our…credit score? Well, maybe it’s not that serious, but we can all agree that our credit score strongly determines our ability to purchase a car, a home, interest rates and sometimes even employment eligibility. Using credit cards (responsibly) can do wonders for building credit. In order for this to work, spenders should be paying close attention to spending habits and paying credit card bills responsibly and in a timely fashion. This is one benefit debit cards can’t offer.

Rewards

With a million options available, many credit card programs provide points towards airline miles, consumer products and even cash back options. With hundreds of blogs and online forums dedicated to helping people create a rewards program strategy, it’s pretty hard to mess this up. There are entire communities of people that use credit cards strategically, in their daily spending, to earn free vacations, appliances and free cash. Let’s not forget that some credit cards offer consumers extended warranties on certain purchases as well.  To me, this is hands down the best benefit to using credit cards over debit cards – IF you are disciplined and organized enough to track your spending and manage these accounts.

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Fraud & Security

Yet another win for credit cards, lost or stolen credit cards mostly offer more protection for the consumer than debit cards. But debit card users aren’t completely out of luck, The Electronic Funds Transfer Act does provide coverage for debit card users that report the card missing within 48 hours. Beyond the 48 hour window liability increases for any lost or stolen card (credit or debit). When it comes to disputing transactions, credit cards win again. When a debit card is stolen and money is spent, cardholders don’t often see their money back until the case has been investigated and closed. Fortunately for those who favor credit cards, the laws regarding disputes are much more forgiving.

Responsible Spending

This is where debit cards win. With no frills and no fees, debit cards help consumers to control spending and manage their finances responsibly. If the money isn’t there, you can’t spend it – and for many people, they’d rather keep it that simple. Not to mention that many credit card programs come with pretty hefty annual fees in contrast to the perks they offer which most often isn’t the case with debit card accounts.

At first glance it would seem that credit cards ultimately win, but like anything else it largely depends on the cardholder, their needs and spending habits. The overall point, however, is that many people don’t give this topic enough thought or consideration while swiping – it might be time to think about whether or not your choice of plastic is working for you.

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