Credit or Debit – which card should you use?
Some financial experts say that use of credit cards leads consumers to spend more, because it’s so easy. They say if you must use plastic, use a debit card so you’ll spend only what’s in your account. The danger there is in going over limit, just as it is with writing a check for more money than you have in the account.
How to use your debit card:
At the checkstand, you always have an option of using your debit card as a credit or a debit. When you use it as a credit card, it’s called an “offline” or “signature-based” transaction and like a check, it will take a little longer to post to your account. Using your PIN number and calling it a debit is an “online” transaction and it is withdrawn from your available balance immediately.
While this time difference is so slight that most consumers would hardly notice, it makes a difference to the retailer. When you use the credit button instead of the debit, the merchant pays a higher fee to accept the card. On the other hand, some card issuers reward you for such use by crediting you with a small rebate. Additionally, some card issuers charge you a fee every time you use your PIN and make an “online” transaction.
The dangers of using a debit card:
Credit cards have more protection under the law. While you can dispute a credit card transaction and get your money back, when you use a debit card it becomes more difficult. Merchant mistakes, double billings, or fraudulent billings are sometimes impossible to resolve. The merchant already has your money and you’ll have to convince him to give it back, whereas with a credit card, you can have the charge reversed and “charged back” to the merchant.
Theft is a different matter. Under the Electronic Funds Transfer Act you’ll be responsible only for the first $50 if your debit card is lost or stolen – as long as you report it within 2 business days. This is also true with credit cards, except the 2 day time limit does not apply.
Using a debit card for car rentals can harm your credit scores! Some companies will check your credit each time you use a debit card to rent a car – putting a potentially score-damaging inquiry on your credit report.
Businesses that require a credit card to hold a reservation present another danger… Car rental agencies and hotels can cause the worst damage, because the dollar amounts can be large. Each puts a “hold” on your bank account for the amount they expect you to eventually owe – tying up money you might have planned to use for other purposes, such as a trip to the grocery store. You could innocently write checks that will bounce, not realizing that you have essentially
