Many people use debit cards for everyday purchases, but doing so isn’t the best money move. Using a credit card can offer more benefits and can help you earn rewards on your spending. If you primarily use your debit, you may want to consider a credit card instead. Here are five reasons to ditch your debit card.
1. You won’t build credit by using a debit card
When you use a debit card, you miss out on building your credit. Having a good credit score is essential, and your credit situation significantly impacts many areas of your life. By using a credit card, you can build your credit and raise your credit score.
Paying your credit card bills on time is one way to build credit. The age of your credit history is also an important factor. So if you’ve ignored the need to build credit, now is an excellent time to open a credit card and use it regularly so that your credit age increases.
2. A credit card offers better fraud protection
While you may have some fraud protection using a debit card, its limited protections mean you may be liable for costs associated with an unauthorized charge. Most of the best credit cards have a $0 fraud liability policy, meaning you don’t have to worry about paying for unauthorized charges made with your card. Before you get a new card, make sure it offers this level of protection. Then, if you notice an unauthorized transaction on your credit card account, just contact your card issuer to dispute the charge.
3. The dispute process can be lengthy with a debit card
Sometimes unauthorized charges occur, or mistakes result in charging errors. The debit card dispute process can be lengthy. Since your debit card pulls money directly from your checking account, you’re without the disputed funds while you wait for the bank’s investigation. If you have limited funds in your account and the transaction in question is a significant amount, waiting for the investigation can be stressful.
Credit card issuers have fraud teams that investigate fraudulent transactions and other issues. In many cases, they remove the charge from your account until they investigate and resolve the issue. Since credit cards don’t take money directly from your bank account, there’s no concern about your money being unavailable.
4. You don’t earn rewards
You can earn rewards points just by using your credit card for purchases with a rewards credit card. You can redeem points for things like travel, gift cards, and statement credits. If you’re not using a credit card, you’re missing out on rewards.
Some banks offer debit cards with cash back rewards, but typically these cards earn a low rewards rate. A great rewards credit card can earn at a higher rate, plus the card may have other valuable benefits.
5. You miss out on purchase protections and other perks
Debit cards don’t offer purchase protections or other beneficial perks. Many credit cards include useful benefits such as extended warranty coverage and return protection.
It makes a lot of sense to use a credit card for your everyday purchase needs. It may be time for you to ditch the debit card and get a credit card. Just make sure you only charge what you can afford, and pay your balance in full to avoid expensive credit card interest.
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Original source: The Motley Fool