Most people now primarily use debit cards to access their funds in their checking accounts. There may be times when you wonder whether it’s better to use a debit card or a credit card for your current purchases. Generally, it is better to use a debit card to avoid getting into trouble and spending money you don’t have by using a credit card. However, there may be times when it makes sense to use a credit card instead. Below is a list of common scenarios where you might feel justified in using a credit card and how to handle them.
Renting a Car or Hotel Room
Some car rental companies and hotels require a credit card when renting a car or a room. In this case, you may need to use your credit card. They want this to be able to charge you for additional fees you might incur for room service or damages to the rented car. Typically, your credit card needs to have a certain amount available on it for this to work. It can actually protect you since the hotel will place a hold on your account, meaning you may not have access to all the money in your account. If you have bills due and usually have a low balance in your checking account, this might be the better option for you.
Store Discounts
One of the most common reasons people want to use store credit cards is to benefit from store discounts offered when using a credit card. However, unless you pay off the credit card amount immediately, you will end up paying more interest than you save on the deal. Store credit cards often have the highest interest rates among all credit cards. If you want to take advantage of store savings, consider signing up for a store debit card like those offered by Target. You can also pay off the credit card before leaving the store. Some stores may allow you to pay your balance with the cashier or you may need to visit customer service.
Rewards
Another common reason people use credit cards is to take advantage of cash back or travel rewards. Most people who use cards for rewards do not pay off the full amount owed each month. If you don’t, you’ll end up paying more interest than you earn in rewards. You should pay off your card in full each month to really benefit from the rewards. Some debit cards also offer cash back points for use. Consider looking for one of these cards instead of using a credit card to earn rewards. Reward offers can be tempting, but you should not use them until you are confident that you can pay off the balance in full each month. This usually means becoming debt-free and mastering your budget to make that happen.
Travel
Some people prefer to take credit cards with them when traveling. They feel safer because they are not giving people access to their bank accounts, which can be quickly depleted if the card is lost. This is a personal matter. Most debit cards come with the same protection as long as you report the loss in a timely manner. However, if you feel safe while traveling and have the ability to pay everything off when you return home, this may be an option that works for you. It is still important to monitor your transactions regularly to ensure that theft does not occur.
Expenses
Work
Your job may require you to purchase items out of your pocket and then reimburse you for the difference after submitting receipts for expenses. Some people prefer to use a specific credit card because it keeps expenses separate from regular purchases and is easier to track. However, you may end up paying money in interest depending on how quickly they reimburse you. Another alternative is to open a checking account that you use for these expenses. You may need to put in a hundred dollars or so initially to cover the expenses, but then you can replenish the money with what you receive as reimbursement, and you can use this account solely for your business expenses. This helps you avoid accumulating debt that isn’t really yours.
Emergencies
People often start using credit cards to help cover emergencies such as an unexpected medical bill or car repair cost. Creating an emergency fund is the best solution to avoid using your credit card for emergencies. Once you reserve the money, you won’t need to put this type of expense on your credit card, and it can make the situation much less stressful.
Was this page helpful?
Thank you for your feedback! Why?
Sources:
Bank of America. “The Pros and Cons of Store Credit Cards.”
Source: https://www.thebalancemoney.com/how-do-i-tell-when-to-use-my-credit-card-or-debit-card-2386311
Leave a Reply