Debit or Credit? Pick a Card
This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing the differences between debit and credit cards, and when it might be better to use a credit card:
Americans use debit cards more often than credit cards, but they tend to use credit cards for higher-dollar transactions.
The average value of a debit-card transaction in 2018 was just $36, while credit-card transactions averaged $89.
This usage reflects fundamental differences between the two types of cards. A debit card acts like a plastic check and draws directly from your checking account, whereas a credit-card transaction is a loan that remains interest-free only if you pay your monthly bill on time. For this reason, people may use a debit card for regular expenses and a credit card for “extras.” However, when deciding which card to use, you should be aware of other differences.
In general, you are liable for no more than $50 in fraudulent credit-card charges. For debit cards, a $50 limit applies only if a lost card or PIN is reported within 48 hours. The limit is $500 if reported within 60 days, with unlimited liability after that. A credit card may be safer in higher-risk situations, such as when shopping online, when the card will leave your sight (as in a restaurant), or when you are concerned about the security of a card reader.
If you regularly use a debit card in these situations, you may want to maintain a lower checking balance and keep most of your funds in savings.
You can dispute a credit-card charge before paying your bill and shouldn’t have to pay it while the charge is under dispute.
Disputing a debit-card charge can be more difficult when the charge has been deducted from your checking account, and it may…
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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 22 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.
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