By, State Treasurer Kelly Schmidt
Do you have a go-to card, one that you use for all your purchases? Which card SHOULD we be using? When you think about using a debit card vs. a credit card you might be thinking, Treasurer, this is a no brainer, I should use my debit card so that I do not build debt with a credit card. However, do you know which card is the SAFEST to use?
First, to differentiate how each card works. A debit card draws funds from what is in your bank account. A credit card allows you to borrow money that must be repaid. Some people get into the habit of using their debit cards to ensure that they have no debt, but here are a few reasons you may want to rethink that decision. Using your credit cards regularly has a few advantages such as; building positive credit, receiving rewards on purchases, and, most importantly, will protect you if your card is stolen.
Building positive credit
When you use a credit card responsibly (meaning paying off the balance each month), this will reflect on your credit score. Having good credit can benefit you later when purchasing a car or a house.
If you are going to spend the money anyway on groceries and your everyday purchases, you should take advantage of earning rewards back. Most credit cards will give you a cashback percentage on your purchases or points, which can be used for gift cards or travel miles.
If you were to lose your credit card, the thief would be spending the issuer’s money, but if you lost your debit card, the thief would be spending YOUR money. The Fair Credit Billing ACT has capped the liability of credit card users to $50, and most companies won’t even charge you that. However, if it’s your debit card that is stolen, you could be responsible for the entire amount that the thief spent.
Is it worth taking the risk of your debit card being stolen and having the financial burden placed entirely on you, or begin using your credit card for every purchase? I highly encourage you to make the switch to your credit card. Develop a system, checking your credit card statement regularly, or better yet enter each credit card purchase in your check register so that you can ensure you have the funds to pay your card in full each month. You will build your credit, earn rewards, and will be protected if someone ever tries to steal your information.