If you’ve ever been at the register and reached for a card, pausing to consider which card is the best one to use, most money experts will tell you to always go for your debit card. But there are actually times when your debit card is the worst choice. So, why use a credit card instead?
Here we’ll look at the top reasons why you should be reaching for your credit card and how doing so can have a major positive impact on your credit score.
Rewards Programs and More
Credit cards have gotten a bad rap in the past, mainly because using one can easily land you in debt, if you’re not careful. But in this economy, many consumers have learned how to spend and invest their money wisely. Because of this, credit card companies are stepping up their game, offering excellent rewards systems, incentives, lower rates, and of course, the ability to build up your credit, if you know how to spend wisely.
Here, budgeting is key and with all the perks and benefits that come with credit card use these days, there are several reasons why you should be choosing your credit card over your debit card and reaping the rewards.
When it’s in Your Interest
When you get your monthly credit card bill in the mail you have to pay what you’ve charged to your card for that month. As long as you pay the entire amount then you’re basically getting a one-month no interest loan. Some types of credit cards offer an even longer grace period that extends the zero-interest loan for one or two more weeks.
Cashback, Air Miles, Rewards, and More
These days, most major credit card companies now offer a type of rewards program that’s based on how frequently you reach for your card. These points can add up to goods and services, hotel stays, free flights and pretty much anything else your little heart desires, depending on your spending habits. There are also cashback bonuses to consider.
Many major airlines now work with credit card companies to offer flight miles each time a card is used. So, if you’re a frequent flier, then this can be a huge incentive to use your card often. Just make sure you choose a card that offers this type of rewards system.
One major overlooked benefit is purchase protection. This is a benefit most major companies now offer their cardholders. In most cases, it’s much simpler to have a charge removed using your credit card than it is with a debit card. We like to think of it as a type of insurance plan. If anything happens to your new purchase during the period that it’s covered, you might be eligible for reimbursement via the credit card company. This time period usually ranges from one to three months.
Some credit card companies even offer a type of return protection, in the event that later on you decide to return an item that the store won’t accept.
Another protection perk comes in the form of warranty protection. Many credit card companies offer double the warranty on certain purchases. This can include up to twenty-four months on furniture, appliances, and electronics. Some companies will even extend the protection of warranties up to four or five years, which is pretty impressive. With this type of offer, you can now feel at ease about declining that special add-on protection that the salesperson is trying to sell you, and you’ll still be protected.
Building Your Credit
One of the most common reasons people use their credit cards is because doing so is beneficial to their credit scores. When a debit card is used it doesn’t do anything to a FICO score or your credit history, but when used responsibly, a credit card can bring your credit score up. And as you know, a higher credit score can lead to a number of benefits including better credit card terms in the future and lower interest rates.
If you’d like to learn more about how you can qualify for a credit card, check out our killer guide on how to repair your credit by clicking here.
If your card is stolen and the thief decides to immediately go on a shopping spree, your credit card company has got you covered. These purchases are automatically covered under the Truth in Lending Act. This is a type of federal statute that will limit your liability to no more than fifty dollars.
However, if the thief uses your debit card, it’ll be covered under the Electronic Fund Transfer Act. This federal act will limit the consumer’s liability to different amounts depending on when the card was reported missing. If the card is reported missing within forty-eight hours, the consumer’s liability is limited to fifty dollars, but if the theft isn’t reported for seventy-two hours, the consumer will be responsible for up to five hundred dollars. After sixty days the consumer is usually responsible for the whole amount.
When to Not Use Your Credit Card
- For many, paying off a credit card can be a major financial challenge, especially if the card wasn’t used responsibly, meaning you spent more than you could afford to. If you’re in serious debt, instead of paying the minimum monthly payment and continuing to use your card, opt for your debit card instead and focus on paying down your debt.
- There are many credit unions and banks that now offer their own rewards programs, giving cardholders the chance to enjoy perks by earning points.
- A debit card payment registers immediately, which means fewer delays, compared to credit card payments and their pending periods.