A common topic of discussion in personal finance revolves around the choice between credit cards and debit cards. This debate doesn’t yield a straightforward answer since it largely depends on individual preferences and financial objectives. Nevertheless, there are elements worth considering when making your selection:
Rewards
Though some debit cards carry reward programs, they’re relatively sparse. Majority of these programs require an annual fee. One of the few free reward programs is the one by PerkStreet Financial. Generally, if rewards interest you, credit cards are a better bet. They offer access to a wide range of rewards including travel benefits, cash back, gift cards, and merchandise. If you’re seeking rewards, it’s advisable to explore suitable programs and give credit cards serious consideration, as they offer wider access to a diverse number of rewards programs.
Interest & Debt
The fear of debt accumulation and wasting money on interest charges makes some people apprehensive about credit cards. If this resonates with you, using a debit card can be a wise choice. While credit cards can be beneficial and you can evade interest by settling your balance monthly, many individuals struggle to resist their allure and slowly get entangled in debt. Using a debit card helps keep this in check, as it only allows you to spend money you have readily available.
Fraud Security
These days, most debit cards – especially those affiliated with a major credit card company – offer fraud protection features. This was not always the case, but as more and more debit card issuers provide fraud protection at par with credit cards, many people now feel at ease using their debit cards without fretting over possible fraudulent purchases.
When Credit Cards are Preferable
There are specific scenarios where using a credit card is more advantageous. These often involve travel and potential holds that could result in an overdraft or other complications. Some instances where credit cards would be preferable include:
Car Rental: Credit card issuers often provide automatic insurance coverage, and most car rental entities don’t accept debit cards.
Hotel Stay: Hotels usually place a hold exceeding your bill, presenting a hassle for debit card users. Keeping your checking account funds free by using a credit card is advisable.
International Travel: Depending on the fees, using your credit card could be more beneficial while safeguarding your checking account from foreign transactions.
What’s your take on this? Which type do you lean towards?
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