Debit or Credit? Tesh Tuesday

Sometimes It's Better to Choose Credit Over Debit

How should you answer the question: “Debit or credit?” Since debit is basically cash, that may seem like the smarter move, but there are a few times when credit is much better than debit. Here are the facts, courtesy of Money magazine:

• Use credit instead of debit when you’re making a major purchase, like a big-screen TV. Especially if you buy online, because what you see isn't always what you get. Why? Because if the goods or services aren't delivered as promised, your credit card company will deal with the merchant on your behalf. You owe nothing until the problem is resolved. However, if you use a debit card, the money’s gone from your account, and you have to wrestle with the merchant to get your money back. Using a credit card for major purchases will also give you increased warranty protection and insurance against theft.

• Use credit instead of debit: When you’re buying gas, renting a car, or checking into a hotel. Merchants want to make sure they get all their money. So on a debit transaction, they figure out the maximum you could spend, and put a hold on your bank account for that amount. For example, at a gas station, they’ll freeze $75, and even if the total sale is $30, the extra $45 won’t be unfrozen until the transaction is finalized, which can take up to 48 hours. Hotels and car rental companies freeze even more, to cover incidentals or damage. So, it may cost $800 for a four-day hotel stay, but the hotel could freeze $1,100 for six whole days.

• The final reason to choose credit over debit: Liability. If your credit card or account number is stolen, you’re responsible for $50, max. With a debit card, they could empty your entire account, and it might take weeks to get your money back, and you have to go through a lot more hoops to get reimbursed. Another worry: The more often you use your debit card, the more you’re potentially exposing your card number to scammers – and the more likely you are to be ripped off.