The Debit Card/Credit Card Debate: Which one is Right for you?
Many Americans now use debit cards as an alternative to paying by check, cash or credit card. They certainly are a convenient way to for purchases, but are they the right form of payment all the time?
Well, this answer certainly is up for debate, although there are plenty of pros and cons, for both credit card and debit card use, which you should consider before making your next purchase:
Pros of Debit Cards
- Ideal for consumers who want to avoid credit card debt
- Usually no fees associated with debit card purchases
- Ideal for staying within your budget, as the money is withdrawn from your bank account
- Usually accepted where most credit cards are accepted
- No monthly bills or interest rates to worry about
Cons of Debit Cards
- You may face large insufficient fees through your bank if you overspend (this can be solved by linking your savings account to your checking account for overdraft protection)
- May not afford customers the same incentives and perks of credit cards (cash back rewards, rebates, etc.)
- May not offer the protection against fraud and defective goods and services that credit cards offer
- A thief may be able to drain your bank account before you notice fraud (although your debit card may be protected against fraud, it may take some time to receive your lost money)
Pros of Credit Cards
- No need to pay interest fees if you pay it off within the first billing cycle
- Typically accepted at most retailers
- Offers the luxury of buying now, paying later
- May prove extremely useful in emergency situations
- Offers different types of perks and incentives, such as cash back rebates and travel incentives
- Protects cardholders from fraudulent account activity or defective goods and services
- Positively affects your credit score, if used properly
Cons of Credit Cards
- Can negatively impact your credit score, if used improperly
- Charges interest fees if the balance is not paid in full each month
- Can cause you to overspend, or purchase items that you don’t need
- Can get you in over your head in debt, thereby negatively impacting your budget
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