5 Best Reasons To Use a Credit Card Over a Debit Card

There has been a long-standing debate for some time now about whether it is better for consumers to use a credit card or a debit card for all of their purchases. Many people fall into the camp of exclusively using their debit card, while only resorting to a credit card in the case of an emergency.

I, on the other hand, think that couldn’t be more wrong. In fact, if you are responsible with your credit card(s), and use them in the exact same manner that you would use a debit card (by paying your balances off in full each month), then you can come out drastically ahead by opting for a credit card.

Curious how? Here are the top 5 reasons why:

1. Building Your Credit

If you’re someone who believes in only using cash for everything you purchase, that is fine, to each their own. But realize that there will come a time when you will want, or even need to finance a large purchase.

Take purchasing a home for instance, in order to qualify for a loan to purchase a home you need credit, good credit at that. Not only do you need good credit to qualify, but having good credit will also help you land a lower interest rate – potentially saving you thousands of dollars over the life of your loan.

So how can you build your credit to prove to mortgage lenders you’re a responsible borrower? By having credit cards and using them responsibly!

2. Protection From Fraud

Which is worse, losing your debit card that is directly tied to all of the money in your checking account, or a credit card tied to a credit limit extended to you with no cash of your own at risk?

Exactly.

The fact is, credit cards protect you from fraud significantly more than debit cards do. Credit cards are regulated by the Fair Credit Billing Reporting Act, which limits your liability to unauthorized purchases to a maximum of $50. So if your credit card is stolen and someone racks up $5,000 in purchases on it, at most you would be liable for just $50.

Debit cards, however, are regulated by the Electronic Fund Transfer Act, and the coverage is considerably different. If you notice a fraudulent charge on your debit card and report it in two days, your liability is still just $50.

But after that two day period, that liability jumps up to $500. Don’t report it for more than 60 days? Then you could be liable for the entire amount of the charge.

Now I hope you are checking your bank statements more often than every 60 days, but let’s be honest here, most of us don’t do it every two days…but if you’re using a debit card for all your purchases and you miss a large fraudulent charge within that two day window – then you’re out $500, my friend.

Which would you prefer? Being liable for $500, or $50?

3. Purchase Protection

Do you do a lot of online shopping? Do you get frustrated when you buy a new item for $80, only to see it drop to $60 the next week?

Well, you’re in luck because there are many credit cards out there that offer purchase protection to help you out in that very instance. When purchasing an item with a credit card with purchase protection, oftentimes you are covered in the case of a price drop for the next 30-60 days. If the price does drop, they’ll issue you a statement credit back to your account!

Debit cards do not have this benefit, so if the price changes drastically on that new computer you bought, you’re out of luck.

4. Holds On Your Cash

Have you ever checked into a hotel room, or rented a car, only to be told that they would be putting a charge on your card that acts as a deposit to cover incidental damages?

When that charge goes on your debit card, your cash funds are tied up into that charge until it gets reimbursed to you after you check out or return the vehicle – which in my experience could be up to 5 days after you left the hotel. Who wants their cash tied up like that for 5 days?!

However, when you use a credit card, it just codes as a pending charge against your credit limit, instead of your hard-earned dollars.

5. No Travel Benefits or Rewards

Finally, my favorite reason, is that debit cards seldom come with any travel benefits or reward points!

This means that if you’re using a debit card for all of your purchases, you could be losing out on hundreds or even thousands of dollars in travel rewards each year!

Travel credit cards not only help you earn points towards free travel but can come with so many other benefits like hotel elite status, airport lounge access, rental car benefits, airline or dining credits, travel insurance, purchase protection, and so much more!

Not interested in travel? Then at the very least, you could be using a cash-back card to help extend the savings on every purchase you make back to your wallet!

Final Thoughts

The bottom line here is that my debit card only comes out of my wallet on the off chance that I need to withdraw money from an ATM – and that’s it.

The fact of the matter is that debit cards simply cannot provide the return on your spend, benefits, and protections that credit cards can – and they never will.

So if you’re a savvy consumer and responsible with your credit cards by not overspending, and always paying your balance off in full, then there is absolutely no reason for you not to be using credit cards!