If you're like many
Americans, you might find you're saying "debit" instead of
"credit" more often at the cash register. Debit card use rose
dramatically in the last decade, surpassing credit card use in 2006, according
to Federal Reserve estimates.
But consumer
protections differ for the two payment options, making credit cards the better
choice in some circumstances. Here are four instances when you should use your
credit card instead of your debit card:
1. Hotel
Registration
When you check in,
the hotel puts a temporary hold on your account for more than you might spend,
say $250 a day, to protect itself against losses. Once you check out, the hotel
removes the hold and charges you the correct amount. If you use your credit
card, the hold is put against your credit limit. But if you use your debit
card, the hold freezes that cash in your checking account. Better to have a
portion of your credit limit frozen for a few days than your cash flow
restricted.
2. Online Shopping
Under federal law,
you're liable for no more than $50 per credit card in case of fraud, and many
credit card companies have zero-liability policies. But with debit cards, your
liability is limited to $50 only if you report the problem within two business
days. After that, you could be liable for hundreds. Take advantage of the
stronger credit card fraud protections and use your credit card to shop online.
3. At the Gas Pump
Crooks are making a
bundle by attaching card readers and secondary PIN pads on gas pumps to skim
credit card and debit card numbers. It's no picnic if they steal your credit
card number and run up phony charges. But if they get your debit card
information, they could drain your checking account and any linked savings
accounts. Even if you report unauthorized usage quickly, you could be without
the stolen cash for a few days while the bank investigates. Although you still
must call your credit card company to resolve unauthorized purchases, your cash
flow isn't disrupted while the problem is investigated.
4. Big Purchases
It's tough to get
your money back if you use your debit card to purchase something that turns out
to be defective. Many credit card companies will provide purchase protection on
items that retailers refuse to take back. The peace of mind of knowing your
big-screen TV can be returned, if need be, may help you sleep better at night.
Partner the
consumer protection with a great rewards program, and your credit card can
serve as a very handy financial tool - as long as you don't find yourself going
on a spending spree you can't afford.
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