Credit versus debit cards: what's in your wallet?
We told you yesterday about skimming, just one of the potential threats users of credit and debit cards face with every swipe.
On the other hand, paying with plastic definitely offers users a lot of advantages: you get the convenience of not carrying cash (which can be stolen) as well as multiple records of your purchases. These forms of electronic payment allow you to take advantage of lower prices on the Internet --- although we've told you about alternate payment methods such as Billeo and BillMeLater that are also available.
In some situations, you need a credit card to secure a reservation --- for hotel rooms or rental cars, for example.
And with credit ...
... card-issuing companies offer services such as price protection, some forms of insurance and the ability to issue a "chargeback" as a last-resort measure if a good or service is not delivered as promised.
But then again: there's that tricky problem of potentially racking up debt, something that should not be minimized.
Paul Stephens of the Privacy Rights Clearinghouse advises those who like the convenience of a card to use a credit card rather than a debit card for everyday purchases, and to pay it off in full each month. If absolutely necessary, use a different card for bigger ticket items that you expect will cause you to carry a balance, he said (although in my book it's wiser to save up the money ahead of time and then charge it and pay it off in one fell swoop).
Stephens also suggests people ask their banks for plain-vanilla ATM cards that aren't backed by credit cards, so they can't be used anywhere other than at the bank.
Retailers pay lower fees for debit purchases than credit card purchases, so you might see incentives to choose debit. But the Banking pages at About.com point out that retailers such as gas stations will "authorize" a purchase when you pay before you pump that will block off a chunk of your money (say, $50) for a certain amount of time -- sometimes days. That could cause you to bounce checks or overdraft.
What's your preferred default method of payment? How do you balance the need for ready access to accepted forms of payment with the importance of protecting your personal information? If you use a combination of methods, please share your strategy below.
Categories: Banks, Cheap/Frugal, Credit cards
