The debate about whether debit cards or credit cards are best is a complicated discussion. Both cards have advantages and disadvantages that can make them worth considering for purchases of any type. When it comes to the battle between debit and credit, having the facts about the advantages and disadvantages can make the decision simpler.
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Protections
One of the major components to consider when making purchases with a card is the amount of protection against fraud. When it comes to the debate about which card offers more protection, the simple answer is credit cards.
Traditionally, credit cards have been used for purchases and thus have often offered better consumer protection programs against fraud and scams. This protection has carried over into online purchases, making it possible to avoid paying for thefts and fraud.
Though the traditional answer is that credit cards are offering more protection, debit cards have begun catching up in the area of protection. Many of the large companies offering debit and credit cards are even offering the same protection features on the cards. Smaller debit card companies who are not affiliated with the large companies might not offer as many protections as credit cards.
Interest and Fees
Fees, interest and charges are another factor to consider when reaching for a debit or credit card. When selecting the card with lower fees and charges, the debit card is the obvious choice.
Debit cards take money directly from a bank checking account. It is not using money from a lender, but rather personal funds. As such, it does not have any interest charges. While the account does not have interest, it can have added fees. Using an ATM machine that is not from the same bank often incurs a charge that ranges in price based on the ATM’s bank. Overdraft charges are another potential cost of using debit if the bank does not have enough funds.
Credit cards are different in the amount of fees because it is a revolving debt. The funds are not personal money; instead, the money is coming from a line of credit offered by the credit card company. This means that the card does have interest fees. The interest charges are variable, but are often above ten percent. Many credit cards will charge as much as 20 percent annual interest. Beyond the interest, the credit cards have over-limit fees, late charges and added fees for balance transfers and cash advances.
When comparing the cost of the card, the debit card is clearly less expensive since it uses personal funds from a bank account. The credit card has more potential fees and added costs to consider.
Rewards Programs
Rewards programs are widely variable between credit and debit cards. While the programs vary, most credit cards offering a rewards program will have better rewards available than debit cards.
The debate between credit and debit is primarily a matter of personal choice. Both cards have advantages and disadvantages to consider before using the cards. Determining which factors are most important is a matter of personal opinion.
David Spader looks at savings accounts over at SavingsAccount.Org.