When Using a Credit Card is Better Than Debit Cards

If you are traveling this 4th of July week (for those of you in the U.S.), chances you will be taking a credit card, debit card, or a few of both with you. There are a few reasons why traveling, credit cards are superior to debit cards:

1. Temporary Charge Authorization: When you make swipe your card at the pump or make other purchases with your debit card the merchant will make a temporary charge for $1, $20, or even $50. The company then charges your account for the amount in full when the transaction has been completed and cancels the initial transaction. The problem is that the initial transaction can take up to 48 hours to disappear from your account and may end up over drafting your account.
   
   
2. Car Rentals: Simply, many car rental companies won't let you rent a car with a debit card, although I think this is beginning to change.
   
   
3. Disputed Transactions: Some debit cards do not offer the purchase protections that credit cards do that allow you to run to Visa or Mastercard to take care of problems if the merchant won't. However, this fact has been widely publicized and as a result Visa and Mastercard have both make a marketing push to let people know that this is changing.

Links
Which to Use @ MarketWatch
Picture - Flickr Selvin

The Perils of Debit Cards

Americans use debit cards a lot. Use of debit cards has grown exponentially and the recent gains coincide nicely with the increased marketing they have received from credit and banking companies. Debit cards are a boon for these companies, they get processing fees still, overcharge fees (at my bank it is almost $40), and they don't have to float you money free for 30 days.

The products are great for people who tend to overspend with credit cards (provided they do not overdraw their checking when using a debit card) and are convenient. But, there are some things you should be aware of.

1. Know your liability policy, the "Zero Liability" that you see marketing generally applies only to cards branded with the Mastercard or Visa logo.
   
   
2. The Zero Liability doesn't apply if someone else uses your PIN.
   
   
3. Potential fraud or stolen cards need to be reported FAST. Debit cards are governed by different laws than credit cards.
   
   
4. It is generally harder to dispute purchases on debit cards than credit.

I don't want to sound the alarm too loud, but these are some things to consider when you visit your local retailer and put down the plastic.

Link
Read more about debit cards.