Credit vs Debit: Which should you choose?

Since credit and debit payments account for the majority of consumer in‐store purchasing in the United States – is one considered a better option than the other? The debate over which is better to use – credit versus debit – has been ongoing. However, research indicates that since 2000, the number of debit transactions has more than doubled, while the number of credit card transactions has fallen by nearly half. Does this mean that debit is a better choice? Consider the comparison below.

Credit Cards

Credit cards are convenient and easy to use often allowing consumers to purchase goods and services they would otherwise not be able to afford. Credit is money a creditor makes available to a person to borrow with the option of future repayment. In exchange for the credit, the lender is paid back the original money plus any interest usually paid on a monthly basis.

Debit Cards

Debit cards are normally associated with or linked to an individual’s regular checking or savings account at their local bank. As a purchase is made, money is electronically withdrawn from the account linked to the debit card. Note: Even though a debit card may have a Visa or MasterCard insignia logo on it, it is not reported on your credit report as a charge card.

Depending on what you are buying, what type of purchase it is, and how much money you have, it may be more beneficial to use credit. As long as you not over extending yourself and routinely pay off the balance, it may be wise to use credit if:

• You are making a major purchase. Credit cards offer the strongest protection on purchase disputes. Whereas, when a purchase is made with a debit card, the money is gone from your account. In cases where you are spending a large amount or the purchase is made online, credit may be the better payment option. You may also get increased warranty protection and insurance against theft of the item with a credit purchase.
• You are buying gas, checking into a hotel, or renting a car. Typically these type of vendors, determine the maximum amount you could spend and put a hold on your bank account for that amount to avoid being caught short on the transaction. For example, hotels protect themselves against incidentals and damages by adding an additional charge on your card. Generally, you can’t access the frozen amount until the transaction is finalized (or you check out of your room and the access the charge), which can take up to 48 hours. You can always secure a hotel or car with a credit card then make the final purchase with debit.
• You are looking to cash in on big rewards. Credit cards historically offer better rewards on purchases than debit cards.
• You don’t check your account history very often. If do not frequently check your card history to monitor spending and fraudulent activity, you may want to consider using a credit card account. Legally if your credit card has been stolen, you are only liable for $50. However, debit transactions can sometimes leave you accountable for much more. 

David "The Financial Ambassador" Leach?