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Debit Card or Credit Card?
I understand that many people are afraid of using credit cards because of all the trouble they have heard others get into with them.
Credit cards can be a valuable tool in building financial wealth if used properly. However, debit cards are great if you aren’t the best at budgeting and keeping track of your expenses.
Debit cards also help you mentally acknowledge that you can’t spend like you are made of money.
Personally, credit cards are one of the ways that I am able to save my family a lot of money, especially since I am a homeschooling stay-at-home mom.
Better Cash Rewards
I love picking out cards that have cash rewards. Not all credit or debit cards have cash rewards, some have airline miles or other rewards, and some have no rewards or perks at all. However, the rewards with credit cards are generally better than those with debit cards.
The cash reward system on my cards are cash back rewards. So, on my credit card account I get a percentage of my purchase in specific categories as cash back which I can use to get a statement credit on my credit card, buy gift cards, buy items via the credit card company and/or their partners, or I can even get a check sent to me depending on the card and its policies.
For example, I have a card that gives me 3% back on my gas purchases. So, in addition to any rewards program the gas station offers, just by using my credit card, I get additional savings.
Checkout: How to Pick Out a Credit Card
In addition to cash back in certain categories, some cards even offer discounts on certain retailers. This money is also given back to you as cash back on your credit card account.
Discounts
Some credit card companies offer a shop online link that will take you to a special page that allows you to sign into your account with the discounted pricing locked in, and sometimes it is just a discount code that you enter at checkout.
Free Fraud Protection
Many credit and debit cards have the ability to freeze your card if it has been lost or stolen so if someone tries to use it, they can’t.
However, many banks will charge you generally around $50 if someone fraudulently uses your debit card. Many credit cards have free fraud protection, so even if thousands of dollars are stolen, you won’t have to pay a thing.
It happened to me before, a server at a restaurant took my card so I could pay for dinner, then used a skimmer to make a bunch of charges on my card. My credit card company did take a couple months to get everything sorted out, but in the end, I didn’t pay anything even though thousands of dollars of charges were racked up in less than an hour of the incident. The credit card company said I didn’t have to call the police, they just asked for the restaurant details, a description of the server, and the name of the server on the receipt and they said they would take care of the rest.
I have had a family member get their debit cards skimmed and they had to prove that it wasn’t them, file a police report and go through many months of proving the purchases weren’t theirs. They also had their bank account locked because everything was under review during the investigation, so they couldn’t purchase the things they needed or pay bills during this time.
Exclusive and Early Access
Some credit cards offer early ticket purchasing and exclusive access to concerts and other events. If you are someone who regularly goes to concerts and other well publicized events, you might consider getting a card like this.
Generally, debit cards don’t offer these kinds of perks.
Free Loans
So, any card that offers you a 0% APR for a specific amount of time, is basically just a free loan. This is a great way to still be able to spend money while also paying off debts in other areas. I have done this many times and it works well for as long as you don’t spend more than you can pay off before the 0% runs out. This is also a great way to pay for home renovations and other investment type activities so you can grow your wealth.
You just can’t do this with a debit card.
Free Spending Analysis Tools
This is a great way to do a mild budget or even to help you organize your main budget. Each transaction is automatically sorted into a category based off of their transaction code. You are even able to edit the category each transaction is assigned to.
Many bank accounts offer similar tools as apart of their online service.
Free Credit Score and Report
Although I would still recommend getting your complete credit report every year, this is a great way to monitor your credit report throughout the year. It will alert you if there are changes on your credit report, give you your credit score, and some cards even monitor your email addresses and other information to see if they have been involved in any breaches or are found on the dark web.
A few banks might offer this for your debit card, but not all of them will. You can set up accounts at TransUnion, Equifax, and Experian so you can keep an eye on your credit and lock your credit to better protect yourself from fraud.
Credit Building
It is important to build credit, so if you are wanting to buy a house with a mortgage or buy a new car with a loan, you can get a better rate and pay less interest over the life of the loan.
As great as it would be to never need credit, it is better to have it and not need it, than to need it and not have it, especially since it takes so long to build.
Although you have to provide your social security number and generally get your credit pulled, you aren’t building credit by having a bank account and debit card.
If you should overdraft and have a negative balance and not pay it back, I’m sure they would report it to the credit reporting agencies, but their is no credit benefit to being in good standing with the bank.
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