Tag Archives: economy

Debit or Credit? That is the Question.

13 Sep

Now I don’t mean to get all “BusinessKnee” on you, but there are just little things in life, like money, that are worth being educated about. We all have heard that infamous question the cashier asks when you pull out that shiny plastic card from your wallet – debit or credit? Hmm…I think to myself “I dunno I have enough in my checking account, I’ll just use my debit card, this way I don’t forget about the credit card bill later on.” I am not sure how your process of deliberation works or if you even have one, but since reading the latest blog from Mint, I used to go through a mental breakdown similar to the one above. Mint is a FREE, yes FREE financial planning website that my husband and I swear by and this post was inspired by one of their latest blog posts “When to Choose Credit Over Debit.”

using debit vs. credit

The 5 Situations to use Credit Over Debit:

1. Online Purchasing

If you are an addictive online shopper, like myself, this is the perfect time to use your credit card. It is much harder to get a refund using a debit card than it is with a credit card.

“Your chances of successfully getting a refund for online scams — one of the biggest complaints the Better Business Bureau (BBB) gets every year — are far greater with credit than debit. In fact, claims over purchases of $50 or more must be resolved within 60 days, as mandated by Federal law.”

2. Restoring Credit

If you have bad credit and are trying to build it back up or are fresh out of college and have no credit at all, you might want to consider using a credit card whenever possible. Debit card transactions are usually not reported to the major credit reporting agencies, and therefore will not build your credit.

It is best you pay the balance off at the end of every billing cycle, I like to set up automatic payments and put them in my Google Calendar so I get an alert a few days before that reminds me until the dreaded bill day.

***By the way, you are going to need credit to finance/ purchase those life milestones like an engagement ring, car, house…the list goes on, so if you don’t have a credit card yet I would suggest looking into one, preferably one you can tie right to your bank account so its your first one and will be easier for you to make payments.***

3. Recurring Payments

I LOVE having my bills automatically paid through recurring payments because it makes it super easy to pay my bills ON TIME. However, a lot of people don’t like them because they feel they may forget that money due for a bill is coming out of their account. That’s why you ALWAYS use a credit card for recurring payments. If you make an accounting error, the payment will still go through on a debit and you’ll have overdraft charges on top of the bill.

4. Travel-Related Purchases

If you love to Travel like I do, a credit card is your best friend. “Many travel-related purchases, like rental cars and hotel rooms, require a credit card when checking in. You also might be required to make some kind of a deposit when you make a travel reservation. If you use debit instead of credit to make a deposit, the money is IMMEDIATELY debited from your bank account, putting you out several hundred dollars in cold, hard cash.” It’s a big financial hit to take at once if you haven’t saved up.

There are perks! “Many credit card companies offer premium points for customers making travel-related purchases or include extra services, like extended insurance on car rentals.”

5. Big-Ticket Items

My husband and I live for this! With me being 1,500 miles from my family, we try to rack up those miles as much as possible. It is great to know your credit card’s reward system inside and out to make the most of your big-ticket spending

“Make sure you always save up cash for any big-ticket items before you throw down your credit card. Mint.com’s “goals” tool helps create a savings plan that allows you to reach your goal easily over time.

As long as you have the cash on-hand, paying for pricey items on a credit card and then paying the balance off immediately is a great way to take advantage of your credit card’s reward system.”

“BusinessKnee” Breakdown

  • Credit cards usually offer more in protection and rewards.
  • Budget, budget, budget so you can avoid interest on a credit card and pay off an item in that billing cycle.
  • Take advantage from some amazing resources like Mint and Google Calendar, which both have apps, to help you with your monthly budgeting and bill pay!

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