Debit or credit?
That's a decision many of us have to make every day when we buy something.
So which is better? A recent Credit Karma report broke down the differences.
Debit cards advantages
Debit cards are now more popular than credit, as you do not need a credit history to have one. All you need is a checking account, or in the case of prepaid, all you need is an email address. They work like cash.
You don't have to worry about a big bill at the end of the month, since you pay immediately with every swipe.
Debit helps you avoid overspending, as you can only spend what is in the account.
Credit card advantages
But credit cards have more flexibility: you can buy an expensive item now (such as an engagement ring or living room set) and pay it off over time.
You build up your credit.
You can earn cash back or airline ticket rewards, often 2% back.
Then only major downside of credit cards: it's easy to fall behind, and end up with huge interest charges if you are not careful.
Extra risks with debit cards
But from the "doesn't that stink" file, why debit cards are more risky, even though nowadays you are protected against fraud:
If your debit card is hacked, the thieves can drain your bank account, and it can take weeks to resolve the issue and get it back. Doesn't that stink?
For that reason Credit Karma says avoid using debit cards at:
- Gas pumps, where hackers can install card skimmers.
- Online retailers you are not familiar with, where it's easy to get hacked.
- Hotels and rental cars, again due to the risk of hacking and also because you typically cannot but a rental car deposit on a debit card.
Bottom line: Credit is safer in most cases, debit riskier if it's connected with your main bank account. Sure, you can now be reimbursed for fraud losses with debit, but it can often take weeks.
And that way you don't waste your money.
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