Debit or Credit — What’s the Difference?

This week, Craig Siminski, of CMS Retirement Income Planning, shares with us an article discussing why it may be better to use a credit card for certain transactions:

The end of the year is a time for holiday shopping, and many consumers face the new year with high credit card bills. If that sounds familiar, you might wish you had bought some of those gifts directly out of your bank account with a debit card instead of putting off payment with a credit card — and risking the potential for high interest charges if you can’t pay on time. But there are good reasons to use a credit card for certain transactions.

Fraud Protection

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 two business days. The limit is $500 if reported within 60 days after receiving your statement, 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 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.

Merchant Disputes

You can dispute a credit card charge before paying your bill and should not 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 account, and it may take some time before the funds are returned.

Also, merchants sometimes place a temporary hold on your account until a charge clears; for example, a hotel may place a hold for the full amount of your stay plus incidentals. If the situation changes, this could be more difficult…

To Read the Entire Article, Please Click Here.

Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 25 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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