This is a Guest Post from Maricel Tabalba at Credit.
Most tips for saving money online center around finding time-sensitive deals, big sales and valuable coupons, but there’s a major aspect to internet-based shopping that isn’t as frequently discussed. Your choice of whether to use debit cards or credit cards to make your purchases can have a significant impact on the amount you wind up spending. It’s therefore wise to consider the benefits and drawbacks of each form of payment.
Both debit and credit cards liberate you from the need to carry around excessive amounts of cash. They also provide a measure of control because you’ll have a record of all your transactions and be able to peruse them at your leisure. There are subtle differences between the two forms of payment, however, which means that one of them will likely fit your needs better than the other.
When it comes to account security, both debit and credit card issuers take some measures to protect you, but in most cases, the safeguards in place with credit cards are more robust.
Under the terms of the Fair Credit Billing Act, your maximum liability when someone steals your credit card info is $50 for offline charges and $0 online. Debit cards aren’t covered by this legislation, and you could find yourself responsible for up to $500 in bogus purchases, depending on the card issuer, unless you report the suspicious activity within two days. If you fail to report debit card fraud within two months, you may find yourself on the hook for all the illicit transactions made regardless of their value.
Debit cards win hands-down in terms of the costs associated with making payments. The only fees you might be charged occur when you spend more than you have in your account, which will incur overdraft penalties. You can easily avoid such fees with a little bit of forethought and planning.
Credit cards, on the other hand, sometimes come with annual fees, and you’ll also be responsible for interest payments, which debit card holders don’t have to worry about. On top of this, there might be hidden fees, so you’ll have to read the fine print carefully before applying for any credit card.
As far as limits on your spending go, credit cards offer a superior experience. They extend your purchasing power because you’re effectively using money that’s not yours. This can be quite useful, but it’s easy to get into trouble by over-shopping and thereby ruining your long-term financial health. Interest can build up rather quickly if you fail to pay off your balance each month, so you could find yourself paying well above the market price for items you bought ages ago. This is totally against the ethos of taking advantage of online coupons and deals in the first place.
Debit cards restrict you to funds that you already possess, which limits your reach but prevents you from making too many impulsive purchases. If you sometimes have trouble reining in your profligate habits when it comes to money matters, then debit cards are a safer choice for you. You will have to monitor your balance closely to ensure that you stay within the resources available to you.
Most providers of services offer reward programs to retain their loyal customers, and card issuers are no exception. With a debit card, you may have access to automatic savings programs, cashback and reduced ATM fees. These are all well and good, but they pale in comparison to the perks handed out by the competitive credit card industry. Travel points, extended warranties on electronic goods, low or even zero introductory interest rates and more await you if you select the right credit card.
If you have a poor or skimpy credit history, then it might be prudent to obtain a credit card so that you can start building credit. As long as you pay your balance off in full every month, you’ll be able to achieve this goal without subjecting yourself to the accrual of interest. Establishing yourself as a good credit risk can reduce the price you pay for a house, a car or some other major investment by thousands of dollars. Sadly, debit cards won’t help you in this department as they don’t count as a form of credit.
Credit cards and debit cards perform many of the same functions, but they do so in different ways. Every consumer ought to think carefully about the selling points and drawbacks of each payment method before committing to either of them. Make a personalized decision based upon on your lifestyle, spending habits, personal foibles and expected purchases. You may opt to use one or the other type of card, both of them or neither.
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