Wednesday, February 1, 2012, AM | 1 Comment
I personally use credit card for almost everything I buy, even for one small item like $2.99 gallon of milk at the corner store as long as the person at the counter accepts it.
I have a debit card but I use it only to withdraw money from ATM at the bank where I got it from. The minimum withdrawal is $20 and that’s the maximum I carry in my wallet.
The first time I got my credit card was back in 1983. Since then I have paid only $4.96 in interest fee and that was when I stayed in London for a few weeks and when I came back to the States, I had missed the due date.
I always pay the full amount before the due date. When I get the bill, I schedule payment through my bank online bill payment feature. I have been using this feature for about ten years now.
One great Advantage using Debit Card
Using a debit card versus a credit card gives folks one great benefit and that is they don’t get into the debt shit that a credit card user might get into.
But for folks like me and millions others who pay their bills promptly and in full that would be a mistake because there are quite distinct benefits for using a credit card.
Credit Card gives you better Protection
Federal law, through Fair Credit Billing, protects you from fraudulent charges on your credit card. When you charge your purchase to credit card, the bank issuing the credit card pays the amount to the vendor. You are obligated to pay the bill only when you go over each item and find no discrepancies.
Debit card transaction is different in that the payment is immediately withdrawn from your bank account right there and then. To be sure, Federal laws and the bank’s policies cover some protection from fraudulent transactions due to debit card theft. Before the bank is able to do anything, your account can be very well depleted.
You can Build Credit History when you use Credit Card Wisely
You can build credit history only when you use credit card wisely. If you miss a payment, the bank fills its belly with extra money coming from interest and late fee. Many folks, for whatever reason, don’t realize it but that’s what happens – filling up bank’s belly is not your responsibility.
Act responsibly and slowly but surely you would be able to build credit history eventually with better than 800 credit score. It takes patience, perseverance and just plain and simple care in your personal finances. Many folks will need high credit score when it’s time to buy a car or a house with favorable interest rate. According to credit experts, debit cards have zero impact on your credit score.
Getting Rewards can be one Big Benefit
Another benefit is you can get rewards by using a credit card that offers this feature. These might include frequent flyer miles, gift card rewards, college savings or just plain cash. I own two credit cards: Master Card and American Express. They both pay cash.
Another useful benefit is many credit cards also double the manufacturer’s warranty when the item is purchased on the card so you don’t have to buy extended warranty. Check with your credit card issuer.
Using Credit Card for Hotels and Renting Cars
It might be extremely difficult if not impossible to use debit card for reservation in a hotel or renting a car. However, there are hotels and rent-a-car vendors that use debit card as well but they might hold a few hundred dollars. That freezes your bank account and if you keep a low amount in your checking account, it might very well deplete it and you will be out in the cold, not being able to withdraw money for other purposes.
In a Nutshell
Go ahead and use your credit card but use it wisely and efficiently. Think about these 4 benefits that I just described and keep using credit card. One more time, use credit card wisely and pay your bills on time and if possible in full each billing period.