Benefits of Credit Cards often Trump the Convenience of Debit Cards
Written by Curtis Arnold
Posted On: July 13, 2009
Debit cards offer convenience and are becoming increasingly popular with consumers, but they still don't offer many of the same benefits as credit cards do. In fact, I can think of five specific areas where credit cards offer significant advantages over debit cards and many prepaid cards: 1. Dispute Protection Talk to any merchant and they'll tell you that nothing unnerves them like a chargeback notice. If you call to dispute a charge on your credit card account, merchants typically get a fax or e-mail notifying them of your concern. Unless the merchant can prove that they are not liable, your account will normally get credited for the disputed charge. However, the impact on your wallet is more profound if you use debit cards, since that cash has already been withdrawn from your bank account. Disputed credit card charges typically get credited very quickly, so you're out of pocket expenses are minimized. 2. Fraudulent Charges It doesn't take long for card numbers from a lost or stolen wallet to wind up getting used at the mall or being sold through the "internet black market." While banks often provide some protection against debit card fraud, unauthorized debit card charges hit your bank account immediately and can weeks to reverse. You may be liable under Federal Trade Commission rules for up to $500 of debit card fraudulent charges, but the same law caps your liability for stolen credit card charges to just $50. It is also worth noting that many issuers offer zero liability policies that totally eliminate your out-of-pocket exposure by covering 100% of unauthorized charges. 3. Extended Manufacturers' Warranties Many credit card issuers partner with retailers and manufacturers to extend warranty periods on popular consumer items. Some credit cards facilitate replacements at retail customer service counters, while others cover the costs of repairs at authorized facilities. Either way, credit cards can help alleviate unexpected frustration. Warranties are often extended up to a year beyond the manufacturer's original warranty. 4. Credit Card Purchase Protection When some punk stole some new lawn equipment from the shed in our back yard, I didn't get upset for too long. I simply called the customer service number on the back of the credit card. Within a few weeks, I got a check in the mail for the full purchase price of the equipment. Many credit card issuers add value by insuring recent purchases against theft or damage for up to 30 days -- consult your card issuer for details. Had I bought the same equipment with cash, I would have had no recourse. 5. Bank Overdraft Fees and Other Related Expenses I call this "avoiding the hassle factor." When you lose a debit card, your checking account becomes vulnerable to much more than theft. If you don't immediately notice money missing from your checking account, stolen funds can cause your legitimate checks and bill payments to bounce. Many banks can ding your checking account up to several times each business day for overdrafts, even when it’s not your fault! In addition, vendors like utility companies and retail stores may charge their own non-sufficient funds fees, causing your bank balance to spiral further downward. Using credit cards consistently insulates you from this kind of “collateral damage”. Remember that enjoying the added value of carrying credit cards doesn't have to result in extra credit card debt. The key is to be savvy. Carry just one or two credit cards so you can limit your risk and enjoy credit card perks. By paying down your purchases in full every month, you can get all of the benefits of responsible card usage without any of the downside. I love making my cards work for me instead of being enslaved to my credit card companies like so many other consumers. I hope you share my convictions and can join me in my crusade! What do you think about using credit cards instead of debit cards? We welcome you to share your ideas on our active credit card forum.
Curtis Arnold, a nationally recognized consumer educator and advocate, has been educating consumers about credit cards since 1998. New! Curtis is the author of "How You Can Profit from Credit Cards: Using Credit to Improve Your Financial Life and Bottom Line" (FT Press, 2008). He is also the co-author of the upcoming Complete Idiot's Guide to Person-to-Person Lending (Alpha Books/Pengiun Group USA, April 2009), a contribitor to The Ultimate Allowance (InnerWealth Publishing, 2008) and is extensively featured in 42 RulesTM for Driving Success With Books (Super Star Press, January 2009).