Debit Cards vs. Credit Cards Which Is Better?

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Should I Carry A Credit Card Or A Debit Card?

For some time now there has been a bit of a debate as to which one makes the most sense, and which of the two that is. I am old school from the era of credit cards  and it is hard for anyone to shake my faith in the useful role that they fulfill when used appropriately. My definition of appropriate use is that the balance is paid off in full at the end of each month so that there are no interest charges incurred.

I can see why some people with a bit less self discipline can run into trouble when they don’t pay off the amount outstanding on the charge card by month end, and end up paying the ridiculously high interest rates that the cards charge.  If that happens, then it is pointless to point out the advantage of the ‘free’ 20 day interest free loan that charge cards can provide when used to maximum advantage.

Debit CardA debit card use has the same effect as an instantaneous cash withdrawal at your bank, with your account being lowered by the amount of your purchase at the moment that you make the purchase. For some people that is the best way to manage their money, by making sure that they spend no more than they have in their bank account. Debit cards achieve that to a certain extent, as long as you have a small enough overdraft so you can’t get seriously into the red.

Using a debit card means that you do not have to carry around large amounts of cash, and they are very convenient to use for making small purchases at the corner store or gas station. Typically they have no annual fees, but they do not necessarily afford the same level of protection as credit cards if they are lost or stolen unless it is reported within 2 days. After that, it is up to the discretion of the financial institution as to how much you may be on the hook for. It could be $500 or more, so ask at your bank.

When you use a debit card to make a purchase you are in essence paying for it in full at the point of purchase so if you have faulty merchandise or a dispute about the purchase itself, you have fewer options and to some degree are at the mercy of the seller who has your money.  As you can quickly discover, getting your money refunded, cheerfully or not, may take some time and or money depending in the sequence of events that follows.

Not so with a credit card. You can simply refuse to make payments until the matter is resolved. Credit cards also limit your liability to $50 when they are lost or stolen, and the financial institution is more likely to be understanding if your circumstances didn’t lend itself to you reporting that your card is gone within 48 hours.

Credit Card For Me, Debit Card For You?

As you can see, there are advantages to having both types of cards. Certainly all large purchases should be made with a credit card, especially if you are going to pay off the balance prior to the first statement due date. A debit card should only be used for small day to day purchases in lieu of carrying cash on your person, although it is difficult to see the advantage except for accounting purposes. A debit card is just as juicy a target in a robbery as cash, and if you think a criminal can’t burn through your account in the time it takes you to notify the bank, think again. And just how much cash do you really plan on carrying anyways? If you are using your debit card for hundreds of dollars in purchases a day, you may want to consider using a credit card.

At the end of the day it is a matter of personal preference. I don’t have a debit card (as you can probably tell) and likely never will. However, I do see their benefits for tracking spending habits, and using them as part of a budget or bookkeeping system to keep a record of expenses and purchases. I have friends who swear by them and wouldn’t be without them.

Till Next Time….

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Sigrid McNab

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About Sigrid McNab

Sigrid McNab is the author of #1 Amazon Best Seller, speaker and the CEO and Founder of sigridmcnab.com. Sigrid specializes in blogging, attraction marketing, and generating highly qualified leads. Sigrid teaches people how to build a successful online business.

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4 Responses to “Debit Cards vs. Credit Cards Which Is Better?”

  1. Hale Yes Says:

    Sigrid,

    Thanks again for you insights. As someone who doesn’t focus on finances nearly as much as you do, I carry both. The debit card is used for day to day transactions and the credit card for tracking larger business trips and expenses. I will certainly never again have more than one credit card. It is just too easy to turn around and have massive CC debt. I don’t want to go there. I keep hearing things like the average American family has $25,000 or $14,000 of CC debt or whatever. At the family level that is the same financial crisis you talked about at the National leverl the other day.

    Thanks again,
    Dr. Hale
    Hale Yes recently posted…An Attraction Marketing Day! A Light Bulb Goes On!My Profile

    [Reply]

    sigrid Reply:

    You are very welcome Hale. I like your one credit card rule…

    [Reply]

    Reply

  2. Dagmar Wichary Says:

    No wonder people will never get out of their financial debt, the interest rate is way too high. I pay off my credit cards by the end of the month and I do not use my debit card very often. Too much is going on with people wanting your ID.

    [Reply]

    sigrid Reply:

    Good strategy Dagmar!

    [Reply]

    Reply

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