When do you use a credit card, and when do you use a debit card? Many individuals don’t give much thought to using a credit card vs. a debit card. They use whichever card is “easiest,” which is generally the card that is nearest at hand. Some wrongly believe debit is safer than credit, while it is frequently the opposite.
Credit Card vs. Debit Card: Which Is Safer?
Others are unaware that using debit will not help them improve the credit score required to obtain a loan or apply for a mortgage. But is credit always the best option, or are there instances when a debit card is preferable? Let’s look at each option and see which is safer to use.
What is a credit card?
A credit card is a line of credit that you can use for internet purchases or cash transfers. In addition, it acts somehow like a loan. You will need to pay a specific amount of money on the same date each month.
Credit cards include a unique 16-digit number that allows you to make transactions in person or online swiftly and conveniently. Your transaction should go through as long as you haven’t surpassed your credit card limit. That is why it’s so simple for some people to spend more than they realize and wind up in credit card debt.
What is a debit card?
A debit card is a banking product linked to your account in which each purchase or transfer results in a debit from your bank account. So instead of buying something now and paying it off afterward, a debit card immediately deducts the whole amount from your account.
Your debit card transaction should be completed as long as you have enough money in your checking account. And because you’re using the money you already have, you won’t get into debt due to the purchase.
How safe are your cards?
Aside from how you spend your money, a significant distinction between debit and credit cards is how illegal purchases are addressed. A thief has immediate access to all the money in your checking account if your physical or debit card information falls into the wrong hands.
Whatever is spent fraudulently is deducted from your balance instantly, and you are devoid of cash until the matter gets resolved. Other accounts, such as a savings account, will also be exposed if connected to your debit account.
Moreover, in certain circumstances, you may not know that your debit card has been used fraudulently until much later. You might only see it when you examine your account statements. If you discover false charges on your report, you must notify your banking institution within 60 days. If you wait over 60 days to report the problem, you may be liable for all transactions between the 60-day mark and the day you notified your bank. It becomes an even bigger issue if the bank can demonstrate that informing them sooner would have stopped those charges from happening.
At the same time, the Fair Credit Billing Act provides credit card users with safeguards that debit card users do not have. For instance, you are only liable for $50 in illegal transactions if your credit card is lost or stolen. Card issuers frequently do not hold cardholders accountable for any fraudulent charges. Furthermore, you are not responsible if you have your actual credit card, but the account number is taken and used to make fraudulent transactions.
When to use credit card vs. debit card
Depending on what you wish to pay for, here are some situations when a credit card or a debit card is preferable:
Use a credit card for online payments
Do you want to know how to purchase securely online? First of all, choose only reliable stores or retailers. Then, use your credit card to make the payments. Because credit cards provide fraud liability protections that debit cards do not, internet purchases using credit carry fewer risks. So, if you’re considering whether to use a credit card vs. a debit for online purchasing, use credit for a safer experience.
Pay with a debit card to avoid debt
If you want to avoid credit card debt, pay off your credit card account in full every month or pay in cash. Making every payment using a debit card might be a wise financial decision to prevent credit card debt. A debit card, for example, can restrict you from spending more than you can afford if you are trying to stay within a budget. At the same time, people seeking to pay off previous credit card debt prefer to use only debit cards until they completely pay off their debt.
Therefore, if you need to hire movers for relocation and you want to plan your budget accordingly, ask for moving estimates and pay with your debit card. Estimates are significant when you are on a strict budget, as they can help you stay out of debt. So ask for as many estimates as possible and pick the one that fits your budget.
Pay with a credit card to build your credit score
If you want to improve your credit score, you should use credit cards. Moreover, if you’re going to have excellent credit, you’ll want to use those credit cards responsibly. That means making on-time payments and keeping your balances as low as possible. A good credit score does not come easy, but having excellent credit card habits and showing lenders that you are trustworthy can help you receive better loans with cheaper interest rates. So get a credit card if you need to build your credit score.
Use debit for pulling out cash
If you have the option, withdraw cash from your debit card. Using this option, you can avoid paying extra fees and interest costs. Furthermore, if you use an ATM of your bank, you will almost certainly not be charged any fees.
So in the battle between credit card vs. debit card, which is safer to use? Well, it all depends on what you need. Using your credit card wisely can give you great rewards and fraud protection. On the other hand, a debit card can help you stay within your budget and avoid credit card debt. So choose between the two based on your needs.