While many people use credit and debit cards interchangeably depending on their current cash flow and whatever is most convenient at the time, being a bit strategic about when you decide to use a credit card versus a debit card can pay off in several important ways. A debit card is necessary in order to perform transactions at an ATM, and certain merchants will not accept credit cards or will offer you a small discount for paying with cash or a debit card because of the relatively high fees they must pay a credit issuer to process each credit card transaction. On the other hand, a credit card offers many advantages such as better consumer protections and often a more generous rewards program—and using one responsibly will enable you to build a good credit history that will benefit you for years to come. Here are some specific situations where it’s generally wiser to pay with your credit card rather than your debit card:
You’re shopping on the Internet: It’s best to choose your credit card over your debit card when making an online purchase in order to steer clear of short-term cash problems and limit your liability in case of fraud. If someone steals your credit card information, the money is taken from your creditor and it’s highly unlikely that you will be held liable for any of it if you report the incident of theft as soon as you discover it. But if someone steals your debit card data, the criminal has immediate access to the hard-earned money in your checking or savings account—potentially leaving you without needed funds while your bank or credit union investigates the matter. Additionally, if you use your credit card to make an online payment, you have sixty days to do a chargeback, or reversal of funds, if you don’t receive an item you purchased or if the quality of merchandise turns out to be sub-par. For more information on how to handle credit card chargebacks, visit the California Attorney General’s website at http://bit.ly/CreditCardChargebackRights.
You need to rent a car: If you’re traveling and need access to a vehicle or if your car breaks down or you get into an accident that leaves you without reliable transportation, you may find that it’s very difficult to rent a car without using a credit card. Understandably, rental car companies go to great lengths to protect themselves from those that might take their vehicle with the intent to steal it, or who may keep the car past the time when they have agreed to return it. Some car rental companies do not accept debit cards as a way to secure a rental car, and many of those that do require that the renter put down a large cash deposit and provide personal references as well as additional documentation (e.g. verification of income such as a paycheck stub, proof of insurance and current utility bills). If you aren’t using a credit card to rent their vehicle, the company may also run a check on your credit, which can lower your credit score. To get around all of this hassle, plan to use a credit card when you rent a car.
You’re making a major purchase: It’s a good idea to pay for big-ticket items such as electronics, furniture, and appliances such as dishwashers and refrigerators with your credit card since you have stronger legal rights if there is a problem with the merchandise. If you are purchasing an item to be delivered at a later time, you also reduce your risk in case the outlet that sold you the item goes out of business. Be aware; however, that there is a specified period of time under which you can dispute the charge, usually sixty days from the date of the first statement on which the charge appears, although some creditors extend this period to ninety days.
You’re booking travel for a future date: To avoid falling prey to vacation scams and to ensure that you don’t suffer major losses if a travel business such as an airline, cruise or resort goes belly up, be sure that you use a credit card when booking travel arrangements. While you can always do a chargeback on your credit card if a travel company goes out of business or you find that you’ve booked a hotel reservation that does not exist, you may find it impossible to recover your money if you’ve paid by having funds directly debited from your account.
You want to set up recurring payments: Automatic payments can be a convenient way to help you manage your time, stay on top of your bills, and avoid late payment penalties. They are also looked on favorably from the point of view of service providers such as health clubs, cable and utility companies, and insurance companies, which use them to make collecting payment easy and to increase the likelihood of receiving a continued revenue stream from a customer. The problem occurs if you are using a debit card for this automatic payment and a business continues to bill your account even after you have cancelled a membership or service. Although this practice is illegal, it happens all too frequently, and the immediate consequences to you are worse when the provider keeps accessing the money in your checking account rather than charging the fees to your credit card which you can easily dispute.
Are you in need of a credit card that will give your finances a boost with money saved on interest payments and annual fees? For a limited time, SF Police Credit Union is offering members the chance to transfer their high-interest credit card debt to a SFPCU Visa with zero percent APR for the first six months and no annual fee! What’s more, unlike most credit cards without an annual fee, our SFPCU Visa offers a robust rewards program that allows you to earn points for every dollar you spend, and the opportunity to earn bonus points and special offers by shopping at retailers that participate in the CU Rewards Program. To apply for your SFPCU Visa today, visit us at www.sfpcu.org/balancetransfer. Please note that Balance transfer amounts will not accrue rewards points.