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MY SUN DAY NEWS

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Credit vs. Debit Cards

By Don Grady

A 2010 survey conducted by Credit.com revealed how American consumers pay for their purchases. The survey said 40% use cash, 39% use debit cards, and only 21% use credit cards. Apparently the downturn in the economy has driven the majority of consumers to not spend what they don’t have. Given the high interest rates that most credit cards charge these days, it certainly makes good sense to avoid running up credit card debt. Yet, 60% of consumers still use “plastic” vs. cash. So if you do use plastic, which is better – debit or credit cards?

Pluses for Credit Cards

1. The Fair Credit Billing Act provides fraud protection to credit card holders for fraudulent purchases.

2. Many credit cards offer extended warranty coverage on product purchases with their card.

3. Although not as robust as they have been in the past, many credit cards still offer points and cash-back rewards.

4. Credit cards don’t charge interest for the first 30 to 45 days after a purchase. That’s a nice “float.”

5. When you charge purchases with a credit card and pay it back on time, you build credit history, which supports a healthy credit rating.

Pluses for Debit Cards

1. Debit card charges do not bear interest.

2. You never incur late-payment fees for debit card purchases.

3. You can’t spend it before you have it.

4. You can minimize your risk of fraud for stolen debit cards or their “pin” numbers by not authorizing “overdraft protection” on the bank account connected to the debit card. Keep a minimal amount in the account. Without such protection, fraudulent attempts to charge your debit card for larger purchases will be “rejected” at time of use.

So which is better? Which type card provides you the best return on the use of your money with the lowest risk?

Keep those letters coming, folks. Send your ideas to: The Frugal Forum, P.O. Box 693, Huntley, IL 60142 or by email to: thefrugalforum@gmail.com





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