First for Women has partnered with CardRatings for our coverage of credit card products. First for Women and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.
If you’ve ever paused at the checkout line before paying as you pondered whether to use your debit card or credit card, chances are, you probably considered your financial security. Use the debit card, and you’d have less cash available for use. But use the credit card, and you’d be accruing debt. If you’re like 54 percent of Americans that participated in a 2018 CreditCards.com survey on the most popular payment methods, chances are, you probably chose the former. But what if we told you the latter might have been the safer option? Due to the discrepancies in consumer protection laws between debit and credit cards, those that have good control over spending will find that a credit card is typically a more secure bet.
Better Protection Against Fraud
Debit cards and credit cards vary in many ways. While the first is connected to your checking account, allowing you to use only the amount you have in cash that you've deposited in the bank for use. A credit card, on the other hand, allows you to borrow money up to a set credit limit (which is often higher than the amount you may have readily available in your bank).As such, debit and credit cards are treated differently by consumer protection laws. For starters, federal law cap personal liability for fraudulent charges on a credit card at just $50. That means if your credit card is proven stolen and thousands of dollars are spent, you won’t be responsible for paying more than $50 by law. Most banks are also set up with fraud control options that will alert you when more than a certain amount is spent on your credit card. For example, the American Express Blue Cash Preferred card not only monitors for potential fraud and sends account alerts to your email or phone anytime a suspicious purchase is being made, it gives you a free periodic FICO score, too.Debit cards, however do not offer the same level of protection. If your debit card is stolen, you could be on the line for up to $500 of a thief's joy spend. Plus, it can take weeks for a bank to investigate fraud on a debit card, during which time your account will remain empty. That’s bad news, since debit card fraud is on the rise. According to FICO, in 2017, debit card fraud was up 10 percent year over year. Credit card fraud for that same year, by contrast, increased by 7 percent according to Credit Sesame.
More Flexibility for Important Costs
Credit cards can also be a safety net for unforeseen expenses. For example, if you make a trip to the emergency room and get hit with a big bill that you can’t afford to pay in cash, a low interest credit card can help you make your payments without falling behind. In a case like this, a card like the Chase Freedom Unlimited, which has no annual fee and a 0 percent annual percentage rate (APR) for 15 months would be ideal, because it would give you more than a year of interest-free time to pay off the high charges. The AmEx Blue Cash Preferred card is another good option that can help to cover unexpected cost. It offers a 0 percent APR for the first 12 months. While there is a $95 annual fee, you’ll get $250 back when you spend $1,000 on purchases in the first three months, quickly offsetting your cost.
Reap the Rewards
In addition to fraud protection and a nest egg in case of emergencies, credit cards offer several other added benefits over debit cards — particularly when making a large purchase. If you’re paying for something big, like a wedding, per se, a good credit card can blunt the amount you'd spend by earning you rewards. Let’s say you’re shelling out $20,000 for your daughter’s dream wedding. Even if you have the funds to cover it, by putting the vendor and venue costs on a credit card, then immediately paying it off in cash, you'll not only keep yourself free from debt, you'll net major cash back rewards or travel points. The Chase Sapphire Preferred would work perfectly for something like this. A spend of $4,000 in the first three months will earn you a 60,000 point signup bonus. If you were to put the remaining $16,000 toward the wedding on this card, you’d be sitting on at least 76,000 points, which is equivalent to $950 in travel when redeemed through Chase’s Ultimate Rewards program!Ultimately, by using a credit card to make your purchases over a debit card, you’ll get better fraud protection, grace periods to work on paying off big expenses, and free rewards to help make up for money spent.
FIRST for Women has partnered with CardRatings for our coverage of credit card products. FIRST for Women and CardRatings may receive a commission from card issuers.
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