When a checkout person asks, “credit or debit?” do you know which to choose? What really IS the right answer? Or does it even matter?
There are actually several things to consider:
- Fraud Protection – If someone makes a fraudulent purchase with your credit card, you have a certain degree of protection because you can dispute the charge. Your debit card provider may limit your liability, but there are more exceptions to these limits and more rules to follow.
- Rewards – Frequent flyer miles, cash back and other credit card rewards programs sound good — unless you’re paying usage fees and/or higher interest rates to get them. Some debit cards are now offering similar benefits for free.
- Spending Control – There are no definitive studies showing which card option is a greater temptation for overspending. Here you’ll have to know your own habits. With credit cards, you have the option to carry a balance — at a price. If you tend to overspend, you may want to limit yourself to debit cards.
- Annual Fees – Paying credit card fees drove many shoppers to debit cards. But now some big banks are thinking of charging debit card usage fees, so it can be a toss-up. Be sure to contact your bank to find out about their current fee policies.