Debit cards can help you manage your budget without sacrificing the convenience of credit cards. But there are just some cases where you absolutely should not use debit for credit.
From the money advisers at our smarter cousins at Consumer Reports, here are five instances where you should avoid using debit cards and consider traditional credit cards:
- For big purchases or shopping online: With debit cards, the purchase amount is debited from your account long before your ordered item arrives. And if you buy something online that comes damaged or defective, you can dispute the charge and ask your credit card company to get involved. What’s more, some credit cards may add a year to manufacturer warranties — a welcome perk on big ticket items.
- While traveling: Many credit cards come with some level of travel and auto-rental insurance. They may also come with concierge services that could help you out in a sticky situation.
- When you’re worried about rip-offs: With a debit card, you can lose up to $500 if you don’t report the theft or loss of your card or PIN within two business days of discovering the problem. With credit cards, you’re only responsible for up to $50 in unauthorized purchases. But your liability for fraudulent charges on a debit card can be greater, as allowed by federal law
- You want to raise your credit score. Using debit cards won’t help you build any credit history. But well-managed credit cards can help boost your score.
- You want to earn money on purchases. A recent federal law cut the amount that banks can make on debit-card transaction, so they scaled back their rewards. If you have a good cash-back or rewards credit card, use that instead.
More shortfalls of debit cards can be found in the source link below.
Prepaid cards: Plastic that’s less than fantastic [Consumer Reports]