Most consumers use their debit card for all purchases. You can avoid debt by paying with debit rather than credit. The money is immediately taken from your account, so you can’t spend more than what you have.
There are many reasons to use a credit card when you shop online.
If you are a victim to fraud, using a debit card when making online purchases could result in greater losses. You also give up valuable protections for consumers and rewards when you use debit to make purchases in stores or online.
Here are some of the many reasons why you should stop using your debit card and switch to a credit one.
1. You could be putting your self at risk of fraud
You may assume that you are not liable for any fraudulent transactions made using your debit card number or checking account, but this is not the case. Most credit cards have zero liability due to the rules of the Fair Credit Billing Act. However, this protection does not apply to debit cards.
Someone who discovers your debit card number can wipe out your entire account. You won’t be able to recover your money if you don’t report it or notice the problem in time.
According to Federal Trade Commission your liability level depends on the time that you report the fraud. If you report the fraud within two days of its discovery, your liability is limited to $50. You are only liable up to $500 if you report fraud between two and 60 days after your statement was mailed. The FTC warns that if you don’t report fraud within 60 days of the date you received your statement, you may lose all the money you have taken out of your ATM/debit account and potentially more, such as money in linked accounts to your debit card.
2. Miss out on Rewards
You could be earning cash back or travel rewards if you made the same purchases with a rewards card. You could earn cash back if you make the same purchases using a rewards card or credit card. These rewards can quickly add up, allowing you to travel the world, buy merchandise, gift certificates, and much more.
You can earn anywhere from 1% to 3 % back on a travel or rewards credit card. However, you can double your rewards if you shop through an airline, cash back or travel rewards portal. In some cases you can shop through portals using a debit card, but in most cases the rewards are limited to airline miles or cashback.
3. No sign up bonuses
If you use a debit card to shop online, you’ll also lose out on earning hefty sign-up bonuses. Many rewards credit cards allow consumers to earn bonus amounts of $500 and more if they meet minimum spending requirements within a short period.
It may seem that you must pay an annual fee to get a sign-up bonus or to receive ongoing rewards. This is not true. There are many credit cards with rewards that offer sizable sign-up bonuses, ongoing benefits, and much more, without charging an annual fee.
4. You are giving up important consumer protections
You may also qualify for free insurance and valuable consumer protections if you use credit instead. This can include travel protections like trip cancellation/interruption insurance, rental car insurance, travel accident insurance, baggage delay insurance, and more.
Online purchases can also be protected by extended warranties, purchase insurance, and guarantee returns. You won’t be eligible for these benefits if you use a debit card to pay for online purchases.
5. Credit history is not being built
You may also want to stop using a debit card because you are not building a credit history through your everyday purchases and online transactions. If you choose to use credit rather than debit, your regular payments and purchases are reported by the three credit bureaus — Experian Equifax and TransUnion.
Credit bureaus need to know about your credit history and payments. This helps them to determine your creditworthiness, and allows you to improve your score over time. Debit cards won’t harm your credit score but they won’t improve it either.
Consider a credit card. Here’s some warning
It’s important to determine if credit cards are right for you. While debit cards can be riskier and less rewarding online, they’re still a good option. Credit cards offer better protection against fraud and the possibility of rewards. They also provide valuable consumer protections. However, they make it easy to overspend, and end up in debt.
It’s crucial to commit to a budget and only spending what you can manage before you apply for a credit cards. The rewards and protections won’t help you if you end up in debt due to the high interest rates charged by most credit cards.
