Debit vs. credit card : Which one to use for making online purchases 44
When you use plastic money to make purchases online, you may often come across the option of using a debit or a credit card. Though both of them can be used for making a purchase online, yet they’re different in terms of how transactions are processed. So, whether to use a debit or a credit card usually depends on the type of transaction you’re making.
Go through this article to know the difference between these two types of cards and how to decide whether to swipe a credit or a debit card.
Debit card vs credit card: How are they different?
When you use a debit card, the amount is drawn directly from your checking account. Whereas, when you swipe a credit card, you’re required to pay back the amount at the end of the billing cycle. If you don’t repay the bill in full, you need to pay the interest on the outstanding balance.
Thus, using debit cards can help you avoid falling into debt.
Every time you use a credit card, you actually borrow money from a financial institution such as a bank. It pays the money to the vendor and you pay back the amount to the financial institution. When you sign up for a credit card, you actually agree to repay the borrowed amount along with the interest drawn on the amount, if any.
Why should you use credit cards for online shopping?
If you are shopping online, then you have to be very careful. It is recommended to use credit cards for online shopping. Because an imposter stealing your debit card or PIN (Personal Identification Number) may withdraw amount from your back account. Moreover, as per federal law, you’re more liable for a fraudulent charge on a debit card than a credit card. You may have to pay more if you fail to report the loss or theft of your debit card within 2 business days.
Check out some more reasons you should use credit cards for online shopping.
Credit cards provide extra protection against online fraudulent activities
Credit cards come with additional protection against fraud. Most of the credit card companies offer zero-fraud liability while providing a credit card to the consumer. If someone uses your credit card without your permission online, you will not be charged money if you report the fraudulent transaction in a timely manner.
But using a debit card can make your account vulnerable. You could even lose all the money from your account. And, it will take a lot of time to get back the money.
You can dispute any charges easily with credit cards
If you order something online and get the product in a damaged condition, then you can easily dispute the charge. Using credit cards makes easier to dispute a charge if there are any issues like (Product undelivered, or damaged product).
On the other hand, using a debit card means your cash has been deducted from your account. If you have disputed items, you will not be able to get the money back until the issue is resolved.
You can build credit over time
Using a credit card for shopping can help you to build credit as you have to repay the credit card bill in full and within a certain time. By managing credit cards properly, you can prove your responsible credit habits, which helps to boost your credit score.
But, debit cards don’t help you to build credit. Also, the debit card usage will not be reported to the 3 credit bureaus.
Credit cards help you to earn reward points
Though there are many debit cards that give you rewards on transactions, yet the rewards on most credit cards are comparatively better than that of debit cards. But using a credit card can help you to earn reward points that you can use on your next purchase. There are also specific credit cards that come with discounts and rewards. You can apply for a gas credit card to buy gas on discounts. A travel credit card helps to earn rewards on miles and discounts on airfare and hotel stay as well.
When to use debit cards
Debit card helps you to control overspending habit. It is quite easier to fall into debt when you use your credit cards for each and every purchase. So, if you’re trying to control your overspending habit, using debit cards for making purchases can help you to do so. You should avoid using a credit card since you are required to pay the bills later. Plus, you can go overboard while shopping.
Lastly, credit cards are beneficial, but you have to use them in a disciplined way. Remember, credit cards are not free money. You have to repay the bill in full and within time. Otherwise, you will fall into vicious credit card debt. The credit card bill non-payments will be reported to the credit bureaus, which will drop your credit score as well. So, you should try to manage credit cards properly to avoid falling into debt.