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<March 2015>



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Is It Best To Reach For Your Credit Card Or Debit Card?

By Bob Vandenbergh, Regional President & COO

In an effort to manage debt, many consumers rely less on credit cards, and use debit cards more frequently to pay for purchases. Using a debit card is often a good idea, but there are instances where a credit card might be the better option. Consider the following:

should you use your credit card or debit card

A Debit Card May Be Best If…

You want to improve money management habits. If you have a hard time sticking to a budget or living within your means, a debit card may be the best option for managing your money. When making a purchase with a debit card, you are essentially paying cash which is better than taking on debt by using a credit card. And, if you struggle to pay credit card bills in full each month, a debit card will not add to your monthly interest fees.

You want access to cash. When you need cash, you can use your debit card at ATMs or get cash back at any point of sale purchase. Getting cash back at a point of sale will save you ATM transaction fees.

You want the best exchange rate on foreign currency. If you need currency in another country, use your debit card at a trustworthy ATM. When you do, you typically get the "wholesale" exchange rate, which is superior to the exchange rate you would get if you used a credit card.

A Credit Card May Be Best If…

You make a big purchase. Using a credit card to buy a big-ticket item for which you’ve budgeted, gives you a number of protections that a debit card might not. For example, credit cards offer cardholders dispute rights if there is a problem with the product purchased. Under Federal law, you can dispute the charge and the credit card company will pursue the issue with the retailer. Some credit cards may also offer extended warrantees on merchandise.

You shop online. Credit cards are a safer option when shopping online because if you encounter online fraud thieves can’t deplete your checking or savings accounts. And, unlike the federal protections for credit cards, which cap your liability for unauthorized charges at $50, your liability limit for a debit card depends on the situation and your promptness in reporting the lost card or unauthorized transaction to your bank.

You book a hotel or rental car. When you check into a hotel, they will often “hold” a specific dollar amount on your card. This means they put a hold on your credit or debit card for the cost of your stay plus additional funds to cover incidental charges during your visit. Once you check out, the hold is released when your final bill is reconciled and your account is charged.

If you use your debit card, you will not have access to the hold amount until the hold is released. Some rental car companies follow the same hold procedures.

Another bonus to using your credit card when booking a rental car is that all four major credit card networks offer rental insurance. There are variations in benefits and requirements on each card so be sure to ask about your card’s specific benefits.

You want to earn airline miles or a cash back bonus. Responsible credit cardholders can earn miles for dollars spent. Many airline rewards cards offer mileage signup bonuses, which are often enough miles to put you 50-100% of the way toward a free flight. If travel rewards don’t interest you, look for a credit card that provides anywhere from 1-5% cash back rewards on your purchases.

You want to build credit. If you have minimal credit or are trying to improve your credit score, using a credit card responsibly may help your credit score because credit card companies report your payment activity to the credit bureaus. Paying with a debit card is like paying with cash, so payment history is not reported to a credit-reporting agency.

Knowing when to use a credit or debit card can help you make the best use of these financial tools. A credit card can protect your purchases from defects and failures, and handle disputes quickly without putting your money at risk, while a debit card can help you stick to your budget and keep you from increasing debt. Ultimately, it is up to you to decide which option is best for your situation. 

lakeland bank debit cardAll Lakeland Bank checking accounts come with a free debit card. To learn more about Lakeland Bank personal checking, click here. Lakeland Bank also offers credit cards, call 866-224-1379 for details. For more valuable financial advice, stay connected with us visit LakelandBank.com, “Like” us on Facebook or subscribe to our YouTube Channel!

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