Money Monday: Credit or Debit?

'Tis the season to break out the plastic, but which is better to use, credit or debit?

Financial experts said it really depends on how you use your cards. Debit is the way to go if you don't pay off credit cards at the end of the month. Spending and not paying off cards monthly will rack up hefty fees.

With debit, you're not as tempted to overspend because the money is taken out right away.

"If you need instant access and you want that money to come out immediately from your account, you don't want to pay it at the end of the month because you're trying to track spending, then you can do that with debit card," said Certified Financial Planner Tony Pampel. "It matches up really nicely with some of the online tools that people use to track your spending."

But debit can have some drawbacks, and credit has real pluses. If you do pay off your bill each month, experts said credit is the way to go and fraud protection is a big reason why.

"There's fraud protection on the debit cards too, but that's a bank by bank case, explains Pampel. "Typically with a credit card, all you have to do is make a phone call to your credit card company and tell them that those weren't your expenses."

Meaning it's easier to dispute a charge than wait to get your money back in your bank account.

The Consumer Financial Protection Bureau said if your actual credit card is stolen, you're not liable for more than $50 in charges.

With the number stolen, you're not responsible for any charges.

With debit cards, most banks have zero liability on your card, but again, once the money's gone, you'll be be dependent on the bank to return it to you as opposed to just disputing the charges. If the debit card number is stolen, and not the card, and you don't report it within two days, you could be held responsible for up to $500.

Experts said rewards can be another reason to choose credit. Some credit cards also offer price protection and warranties for big purchases.

Websites like Bankrate.com and Cardhub.com can help you compare cards.

Contact Us