Debit or Credit: Which Card to Use?

Consumer Reports

View photo

.
Getty Images

Debit cards now rule in the world of plastic. Americans reach for them more often than credit cards when shopping, a trend that's expected to continue. But for some types of purchases, swiping your credit card makes more sense. Here's when you should and shouldn't use each kind of plastic.

Use a credit card...
For big purchases
You don't want to buy, say, a laptop or other big-ticket item with a debit card, especially if you purchase it online. Credit cards allow you to withhold payment if something goes wrong with your purchase, and the card issuer often investigates the problem for you. With a debit card the cash is deducted from your checking account immediately, and it may be up to you to resolve any problems with the merchant.

More from ConsumerReports.org

Plastic that Pays You

50 Money-Saving Tips

 

Consumer Reports has no relationship with any advertisers on Yahoo!

Some credit cards, including all American Express cards, add up to a year to the manufacturer's warranty on the products you buy with them. You may also get additional protections against fraud, damage, identity theft, or plain old theft. Many credit cards also offer complimentary travel insurance, car rental loss and damage insurance, and 24-hour travel, roadside, and emergency assistance.

For gas, hotels, and car rentals
Some hotels, gas stations, restaurants, auto rental companies, and retailers put a hold on the money in your checking account until a debit transaction is processed, which might take up to several days for signature-based payments. What's more, the amount that's blocked can significantly exceed the amount of your purchase. These holds can prevent you from accessing the funds in your bank account and result in bounced checks, declined transactions, or overdraft charges.

To earn rewards
Fewer debit cards have rewards programs, and the programs of the ones that do aren't as good as those of credit cards. Using your debit card won't maximize the amount of cash back or points you can earn. Rewards credit cards, however, tend to have the highest interest rates, so unless you pay off your balance in full each month, you shouldn't use one.

When safety is paramount
Under federal law, your liability for fraudulent charges on a debit card can be greater than it is for a credit card. You're responsible for up to $50 in unauthorized purchases on your credit cards. But with a debit card, you can lose up to $500 if you don't report the theft or loss of your card or PIN within two business days of discovering the problem. And if you fail to report the unauthorized charges within 60 days of the date of the statement that lists them, you could be held liable for any unauthorized withdrawals after that date. Those include the full value of credit lines and funds in savings linked to your checking account for overdraft protection.

In practice, Visa and MasterCard have "zero liability" policies that go beyond the federal law by exempting debit cardholders from liability in most cases when a bank investigation confirms a transaction is fraudulent. But there are loopholes in those policies. People who create fake ATM or debit cards by stealing your PIN and other account data can simply pull cash from your bank account. Using a technique known as skimming, they set up equipment that captures magnetic-stripe and keypad information when you enter your PIN at ATMs, gas pumps, restaurants, and retailers.

When you do use a debit card, don't type in your PIN at the pump; sign for the transaction instead. Use only ATMs inside banks, and monitor your account online for abnormal activity.

Use a debit card...
For budgeting
Debit cards are fine for small purchases, such as groceries and other everyday purchases. You may be inclined to spend less using debit, since you generally know how much money you have in your bank account. Debit cards may also curb the tendency to spend more to earn rewards, a problem for some people with credit cards.

Debit cards have become even better for budgeting now that new federal rules require banks to get your permission to allow overdrafts made with debit and ATM cards and charge fees for those transactions. But the rules, which take effect for new cards on July 1 and for existing accounts on Aug. 15, don't cover overdrafts from checks or recurring transactions, such as automatic bill payments.

Copyright © 2006-2010 Consumers Union of U.S., Inc. No reproduction, in whole or in part, without written permission.

Sorry you didn't like this comment. Please provide a reason below.

Are you sure?
Rating failed. Try again.
Request failed. Try again.
We will promote constructive and witty comments to the top, so everyone sees them!
Sorry, we can’t load comments right now. Try again.

    Recommended for You

    • Woman Who Ate ‘Carbs All Day Every Day’ Drops 100 Lbs. After Eliminating Bread from Her Diet

      Kristina Guice had always been “the fat kid in school,” she says, so when the Tucson, Arizona, native got accepted to graduate school across the country in Long Island, New York, she decided this was her opportunity to make a change. Guice, 25, had recently lost a close friend — who had also been her weight loss inspiration — and got accepted to graduate school just two weeks later.

      People
    • Ryan Seacrest Says ‘Things Are Going Better’ for Kanye West as He Continues to Live Apart from Family

      There might not be a family happier to say goodbye to 2016 than the Kardashians. Kim Kardashian West was the victim of a horrific armed robbery in Paris in early October and her husband Kanye West was recently hospitalized for undisclosed mental health issues after canceling the remaining dates on his Saint Pablo tour. The Kardashian family has gone through almost every up and down, and one non-family member has been there with them the whole time — Ryan Seacrest, executive producer of Keeping Up With The Kardashians and the Kardashians’ close family friend.

      People
    • J.J. Watt accidentally outs relationship in Christmas photo

      A picture is worth a thousand words, or in J.J. Watt’s case, a stocking. After putting the finishing touches on his holiday decor Thursday, the NFL star gave fans a glimpse of his Christmas cheer via Snapchat. But Watt may have slipped up by displaying — tucked away in the background, as Terez Owens was first to point out — a second stocking marked with a “K” for stunning soccer-playing girlfriend Kealia Ohai. Watt has yet to address the relationship publicly, though Ohai — the sister-in-law of Texans teammate Brian Cushing — talked about the pair in October. “The rumors are true. We are dating,” Ohai confirmed on the 2 Up Front podcast. “I’ve known J.J. for a really long time, and we’ve always

      New York Post q
    • Fox Sports investigating incident allegedly involving Coyotes broadcaster

      Fox Sports Arizona is looking into an incident that allegedly involved Arizona Coyotes broadcaster Todd Walsh, according to Deadspin. A Facebook account associated with the name Krys Poleon explained an encounter with a man after Poleon’s car allegedly clipped his side mirror.

      Puck Daddy
    • The jobs report is a perfect example of fake news

      On Friday, we learned the US economy added 178,000 jobs in November and the unemployment rate fell to 4.6%, while over 95 million Americans were not in the labor force. One person can say the unemployment rate is 4.6%. Another person can look at the same report and say the unemployment rate is 40.3%.

      Yahoo Finance
    • Grandmother Finds the Mummified Body of Her Missing Grandson in the Attic 2-Years After He Was Reported Missing | B. Scott

      21-year-old Dyquain Rogers was reported missing on November 1st, 2014. On Wednesday, a mummified body believed to be the young man’s was found in the attic of his grandmother’s home. Investigators believe he committed suicide. via NY Daily News: Relatives of Dyquain Rogers are demanding a complete autopsy after the coroner said the death was likely a suicide, according to GoErie.com. “I don’t believe any of this stuff,” aunt Erica Jeffries-Jordan told the news website. “I want answers.” Rogers was last seen in the same house where he was found, which is also where he lived, Erie County Coroner Lyell Cook told the news website. Rogers was reported missing on Nov. 4, 2014. The body was in the Erie

      B. Scott | lovebscott.com q
    • This Is the Maximum Social Security Retirement Benefit Payable in 2017 -- The Motley Fool

      In 2017, big changes are coming to Social Security, arguably the most important social program for retired workers. About five weeks ago, we took a brief look at seven of these major changes. Topping the list was the smallest cost-of-living adjustment (COLA) on record for Social Security -- just 0.3%. Though this beats the three years since 2009 in which no COLA was granted, other costs, such as medical expenses, are rising at a much quicker pace than 0.3%. In other words, seniors are getting a small raise, but it doesn't appear to be keeping up with their actual expenditures. We're also going to see wealthier Americans paying more into the program. The payroll earnings tax cap is rising by more

      The Motley Fool q
    • Inside the Alleged Abduction of California Mom Sherri Papini

      Keith Papini details what happened before his wife was found alive.

      ABC News q
    • Forget Black Friday, Best Buy is about to host a ‘Special Edition’ sale

      Black Friday and Cyber Monday are behind us at this point, but the special Christmas sales are just getting started. Best Buy on Friday announced its first "Special Edition Tech collection" sale. Beginning on December 4th, Best Buy will start selling a “one-of-a-kind” collection of products that you might not find anywhere else this holiday season. DON’T MISS: A 75-year-old’s excellent Tweet may be the only good thing in 2016 Best Buy will have the following products in limited quantities, both online and in select stores, “so when they’re gone, they’re gone.” Mind you, the list does not include some of the hottest tech gadgets in town, like the iPhone 7 or the PS4 Pro. But that doesn’t make the sale any less exciting. Here’s what’s included in Best Buy’s first Special Edition Tech collection: Shinola Magnolia Edition Red Belt Runwell Turntable, $2,499.98 Lenovo Yoga 910 Glass-Lid Laptop, $1,299.99 DJI Phantom 4 Quadcopter in Black, $1,199.99 The Beatles Collectible 1964 Pro-Ject Turntable, $649.98 GoPro HERO5 Black 4K Action Camera plus Best Buy Holiday Sweepstakes for a chance to win a trip to the 2017 X Games, $399.99 Beats Unity Edition Studio Wireless Headphones: available in USA, Mexico and Canada colors, $379.99 each Harry Potter 8-Film SteelBook Box Set, $99.99 kate spade new york Activity Tracker, $98 TUMI Aston Wrap Folio for Surface Pro, $79.99 South Park Character Figures 3-Pack, $39.99 Team Liquid Razer Deathadder Chroma Elite Mouse and Goliathus Mouse Mat, $69.99 South Park Character Figures 3-Pack, $39.99 Finally, you should also know that Best Buy offers you free shipping on select Special Edition products and all other products from now through December 24th. Best Buy Introduces Special Edition Tech Collection for the Holidays New collection features limited-edition tech gifts; most exclusive to Best Buy  MINNEAPOLIS—Friday, Dec. 2, 2016—This year, Best Buy is making it possible for customers to find that unique, one-of-a-kind gift that stands out from the rest. Today, Best Buy announced its first ever Special Edition Tech collection, a set of 11 limited-quantity tech gadgets—most of which are available only at Best Buy. This list of gadgets includes an exclusive Shinola turntable, a Bazooka-pink kate spade new york activity tracker, a Lenovo Yoga laptop individually numbered with a painted depth glass cover and more. These products will be available in select Best Buy stores and most will be available at BestBuy.com starting this Sunday, Dec. 4. Many are available for a limited time only, and once they’re gone, they’re gone. Best Buy's Special Edition Tech 2016: · Shinola Magnolia Edition Red Belt Runwell Turntable, $2,499.98 · Lenovo Yoga 910 Glass-Lid Laptop, $1,299.99 · Beats Unity Edition Studio Wireless Headphones: available in USA, Mexico and Canada colors, $379.99 each · kate spade new york Activity Tracker, $98 · DJI Phantom 4 Quadcopter in Black, $1,199.99 · TUMI Aston Wrap Folio for Surface Pro, $79.99 · The Beatles Collectible 1964 Pro-Ject Turntable, $649.98 · GoPro HERO5 Black 4K Action Camera plus Best Buy Holiday Sweepstakes for a chance to win a trip to the 2017 X Games, $399.99 · Harry Potter 8-Film SteelBook Box Set, $99.99 · South Park Character Figures 3-Pack, $39.99 · Team Liquid Razer Deathadder Chroma Elite Mouse and Goliathus Mouse Mat, $69.99 This year, customers can take advantage of free shipping on select Special Edition products and all products, with no minimum, on BestBuy.com through Dec. 24. Make the most of your Special Edition tech with help from Best Buy’s Geek Squad® Agents. Agents are available in-store, in-home and online to assist 24/7/365. Visit www.bestbuy.com/geeksquad for details and to schedule an appointment.

      BGR News
    • Five Things To Know About Sherri Papini and Her Family

      In early November, California mother Sherri Papini mysteriously vanished after she left her Redding, California, home for a routine jog. “It all started with a first kiss in middle school,” Sherri wrote on the blog for her 2009 wedding. Sherri moved away and lost touch with Keith for several years, she writes on the blog.

      People
    • Kanye West Living Apart from ‘Concerned’ Kim Kardashian for Medical Reasons: Source

      Kanye West is out of the hospital, but the rapper is not back home with his wife Kim Kardashian West and their two children. A source close to the family tells PEOPLE the entertainer, 39, is living apart from his family for the time being and continuing treatment for undisclosed mental health issues after leaving UCLA’s Resnick Neuropsychiatric Hospital earlier this week. “He is receiving outpatient care else with a medical team,” says the source.

      People
    • Mummified Body In Woman's Attic Believed To Be Missing Grandson

      A Pennsylvania woman made a disturbing discovery on Wednesday when she found a badly decomposed body in the attic of her home. Authorities suspect it’s her grandson, who disappeared two years ago. Zanobia Richmond, 65, heard something fall in the upstairs of her Erie home Wednesday afternoon, according to Erie’s WICU 12 News. When she went to investigate, she was shocked to discover a badly decomposed body had fallen against her attic door. Erie County Coroner Lyell Cook is now working to confirm the identity of the body, but told The Erie Times-News officials are confident the body is Richmond’s missing grandson, Dyquain Rogers. “That is where he lived,” Cook said. Authorities will use dental

      The Huffington Post q
    • The 69 Most Delish Fall Soups (71 photos)

      These easy autumn soup recipes will warm you up. From Delish

      Delish
    • What 'are so many of them doing?' 95 million not in US labor force

      The November jobs report looked pretty good on the surface except for one number that popped off the page: 95 million Americans out of the labor force.

      CNBC
    • 'The Walking Dead': Here's What Happens to Negan in the Comics

      The newest villain in 'The Walking Dead' has been in the comics for a while, so we may have some clue what will happen to Negan next.

      The Cheat Sheet q
    • Texas woman shoots, kills husband during struggle

      A man is dead, apparently shot to death by his wife during a struggle, according to the Fort Bend County Sheriff's Office.

      KABC – Los Angeles
    • Nick Cannon is expecting baby number three with his ex-girlfriend Brittany Bell (and we’re low-key obsessed with her)

      Oooh! Someone shacked up with their ex and has another offspring on the way to prove it! Nick Cannon is expecting a…

      Hello Giggles
    • Inside Edition
    • Jadeveon Clowney looks like a child wearing Vince Wilfork's jersey

      Players and coaches have to find ways to keep things fun, and the Houston Texans seem to have a good grip on that idea. Texans players decided to switch jerseys at practice Friday, and no swap was better than the one between Vince Wilfork and Jadeveon Clowney. A few Texans players switched jerseys at practice today, but the Vince Wilfork and Jadeveon Clowney swap is probably the best.

      SB Nation q
    • EXCLUSIVE: Steve Harvey Wishes Kanye West the 'Best' After Hospitalization, Jokes He Might Follow His Lead

      Harvey is known for his comedic timing, but the funnyman had no jokes for us when it came to discussing West's recent hospitalization.

      Entertainment Tonight