By Jeffrey Weber, Go Banking Rates
Credit Cards. Photo from Wikimedia.org
When at the checkout line and a clerk asks, “debit or credit?” I have only one answer: Credit. There are a number of reasons I never make debit card purchases — security, peace of mind, rewards — but perhaps the biggest reason is that I’ve learned how to use my credit card like a debit card.
I pay credit card balances in full every month and never spend more than I can afford, thereby eliminating interest from the equation and ultimately eliminating the need to use a debit card at all.
While being debit card-free has great advantages, particularly because I earn between 2-6 percent in credit card rewards on everything I purchase, it wasn’t easy learning how to use credit cards like debit cards, and because of the temptation to overspend, ditching debit cards altogether may not work for everyone.
For those who alternate between credit and debit cards, here are five situations where you should always choose credit.
1. Online Purchases
Debit cards offer similar protections as credit cards. Under the Federal Reserve’s Regulation E, the maximum liability for debit card fraud is $50, just as it is with credit cards.
However, dealing with fraudulent debit card purchases is not as simple as dealing with online credit card fraud. If a debit card number is compromised, it can leave a cardholder with no available cash, while the issue is being worked out by the bank. If the same problem happens with credit card purchases, a new credit card can usually be mailed to cardholders overnight.
2. Gas
While many gas stations offer lower prices for debit and cash transactions, purchasing gas with a debit card typically leads to a short-term monetary hold of $50 to $100 that can last a few hours (or possible overnight). This hold can cause issues for consumers with very low balances, especially if it leads to overdraft incidents from outstanding checks, or prevents additional debit card purchases until the hold is released.
3. Hotels
Hotels, like gas stations, place monetary holds on debit cards. At a hotel, a hold of $100 to $200 is typically applied, often in addition to the hotel cost. Once again, this can cause issues for those who carry low balances, which is why a charging this purchase on a credit card is recommended.
Read the full article by Jeffrey Weber from Go Banking Rates.
