April 8, 2015 Admin | April 8, 2015 Why would someone choose a credit card over a debit card? What habits should a person develop with credit cards?
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If you use a credit card you are getting a short term loan with that money. You can then keep your money in your investments longer and get a return off of that since you are getting an interest free loan if you pay off your credit card in full. You may also want to use your credit card instead due to some benefits such as fraud protection and other benefits and perks that differ by card such as cash back. If you use a credit card make sure there are no yearly fees on that card, also make sure to pay off the card in full every time the bill comes due, there is no reason to pay anything to have a credit card. Having a credit card can help your credit grow also.
Credit cards have a few benefits when utilized properly. They provide a buffer between you and whoever you are dealing with. You can take disputes to the credit card company if there are fraudulent charges and you will not lose money. Also the credit card company will be on the lookout for fraudulent charges. Your savings are not at risk.
Also with many credit cards you can get rewards, either in the form of points or cash back, often between 1%-3% of your purchases. You must be careful to pay a credit card off each month. If you don’t your credit score will be damaged from your late payments. Also if you don’t pay the full balance off each month you are charged a VERY high interest rate on the balance, 10%+! $100 you own turns into $110 just like that.
Choosing a credit card over a debit card can have its advantages if managed correctly. Credit cards offer benefits such as purchase protection, price protection, car rental insurance, airline miles, and cash back on certain purchases along with cash bonuses. Debit cards act merely as a digital check book and lack these benefits. However good organizational habits are a must when owning a credit card to prevent missing payments and incurring interest on purchases. Also avoid going over your credit utilization, doing so can affect your credit score negatively. Setting up automatic payments can be a good preventative measure to avoid interest. Having a credit card can also help build up ones credit score if used responsibly, if you do not see yourself as someone who can be diligent in tracking credit card spending, then a debit card may be your best bet.
Those were wonderful comments gentlemen. I have nothing to add. Well done!