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Credit or Debit, which one should you use?

Credit vs Debit

Pros and Cons of Debit and Credit Cards

It used to be easy to understand the difference between a credit card and a debit card. You probably got your debit card first for use at the ATM with a personal identification number, and maybe later you started carrying a credit card for faster checkout and online purchases. Today, both types of card carry familiar credit company logos and both can be used at the grocery store or to make online purchases.  So which should you choose?  And how should you respond to the enticing credit card offers in your mailbox each day, promising financial freedom at a minimal rate?  Let’s take a look at the fine print.


Credit Cards vs Debit Cards


What's the cost?

Interest charges are assessed if you don't pay off your balance at the end of each month.  It's not unusual for credit cards to have annual interest rates over 20%.

Many credit cards also assess an annual fee.

No interest is charged because you use your own funds.  Unlike a credit card, you aren't borrowing money from the bank.

No annual fees, and usually no transaction fees.

How much can I spend? Spending is limited by the amount of your credit limit. Credit cards have spending limits imposed by the credit card company. You can only spend the amount that's in your bank account.
Does it help my credit score? Yes, it can, if you pay on time, and don't carry a high balance.  There are a number of different factors that go into calculating your credit score. Your debit card activity does not impact your credit score.  
What happens if my card is stolen? Your liability for unauthorized use of your credit card tops out at $50. However, if you report your card lost before your credit card is used,  federal regulations mandate that you are not responsible for any charges you didn’t authorize, the same is true if your card number is stolen, but not the card. 

Your liability for unauthorized charges depends on how quickly you report your card missing:

Up to 2 days after the charges occur, $50

Between 2 days and 60 days, $500

>60 days, you are 100% liable