Biz: Debit vs. credit: Some quick notes on using bank cards
- With the new credit laws taking place in February and later this year, now’s a good time to start thinking about how to react to the changes now. As a result, debit cards will be in heavier use. But before you get started, here are some things to consider:
- Introductory points:
- 40% of credit card users pay their balances monthly – something important to note. Paying off said debt can help you avoid some of the larger interest charges
- opt-in a change coming to overdraft fees in mid-year; the often-costly fees on debit accounts are responsible for $25-$38 billion each year in bank profits
- Usage tactics:
- debit Debit cards are easier for many consumers to acquire, and are a good cash replacement. They’re better to use for small purchases, but tend to have many fees.
- credit The better your score, the better the credit. It’s easy to rack up heavy debt, but when used properly, they’re advantageous for larger purchases in particular.
- Safety considerations:
- In cases of theft By and large, you have more protections with credit – Visa and MasterCard protect consumers from all liability above $50. Debit cards will credit accounts as well, but it’s up to the bank, who takes responsibility for the loss.
- In cases of disputes Again, users of credit have the legal advantage here – if a charge is disputed, you don’t have to pay while the charge is disputed. With debit cards, this is in the hands of the banks, not the consumer.
- General protip If you use a debit card to make a purchase, don’t use the PIN. Instead, sign for the purchase. You get many of the same protections you would with credit cards, and you pay fewer fees for the privilege.
- Other things to consider:
- scores Paying back credit cards has a direct effect on your FICO score – important for large loans.
- benefits Overall, you get stronger benefits – such as points – with credit cards than debit cards.
- buffer Debit overdraft fees can come in handy if you’re short, but they can quickly add up. source