7 Reasons to Use Credit Cards Before Debit Cards
The younger generation may prefer to pay with debit cards before credit cards, but this can hinder you. Ideally, you want to use credit cards before debit cards for several key reasons. While it can be true that credit cards lead to debt, responsible use is an essential piece of having a credit card. If you’re someone who isn’t sure about using credit cards before debit cards, read on. We’ll discuss the key reasons why this is a good idea for everyone.
Use Credit Cards Before Debit Cards Reason 1: Build Your Credit History
If you’re just starting out, you most likely have a thin credit history. This can make lenders hesitant to give you loans for cars or apartments. Responsible use of a credit card will improve your credit score. A credit card adds a credit mix to your credit history as well. It’ll also help to build up a solid payment history, which looks good to lenders.
All of these small things come from responsibly using a credit card instead of your debit card. As long as you make your payments on time, a lender will be more willing to give you a loan.
Use Credit Cards Before Debit Cards Reason 2: Discounts and Perks
One of the major things you lose when you use a debit card over a credit card is the rewards. Many credit cards can give you a percentage back from every purchase you make. This typically ranges from 1% to 3% depending on the category, and it can come back as a statement credit. Also, some credit cards offer customers buy now pay later promotions and charge 0 interest.
Depending on the rewards credit card, you can also get other reward options. Some offer travel discounts. You can also stack these rewards and redeem them as gift cards to certain stores. Either way, you won’t get them if you strictly use a debit card or prepaid card.
Use Credit Cards Before Debit Cards Reason 3: Purchase and Travel Protection
Credit cards are great for purchase and travel protection. For example, the Chase Sapphire Preferred card gives you trip cancellation or interruption reimbursement up to $10,000. There’s also auto rental collision insurance, delay reimbursement, lost luggage reimbursement, and more. You get all of this just for having the card and booking your trip with it.
If you book a trip with your debit card and something happens, you won’t get reimbursed. You may get some money back if you take out additional travel insurance. This is another expense though, and many people opt out. Also, many credit cards offer purchase protection. Buy an item, and if it’s damaged, lost, or stolen, they’ll reimburse you. Your debit card won’t do this.
Use Credit Cards Before Debit Cards Reason 4: Rebuild Credit
After you’ve declared bankruptcy, lenders will be hesitant to work with you. You may also mistakenly believe that you can’t get a credit card. This can lead people to using debit or prepaid cards to get by. This can be true for a lot of cards, but there are several available expressly to rebuild credit.
For example, the OpenSky Secured Visa is an excellent way to help rebuild your credit. You do have to put an initial deposit down, and this becomes your line of credit. You can choose your deposit, you don’t need a bank account, and there’s no hard credit check. However, after you make a certain amount of payments on time, you can get a higher credit line. You can use this to rebuild your credit until it’s good enough for an unsecured credit card.
Use Credit Cards Before Debit Cards Reason 5: Better Fraud Protection
If someone gets your credit card information and racks up a bill, the lender covers you. You won’t have to worry about paying it back, and you won’t lose any money. They can also catch it quicker with built-in fraud protection and monitoring. This can help minimize the damage done to your credit.
The Electronic Funds Transfer Act covers fraudulent debit card purchases to a limit. The limit amount depends on how fast you report your debit card as stolen. If you wait two days, you’re liable for around $50. Wait any longer, and you could pay $500 in liability. Your bank can review fraud on a case by case bases, but they’re not required to do so. The lender simply covers your credit card.
Use Credit Cards Before Debit Cards Reason 6: Holds
Many times, a vendor will put a hold on your bank account after you purchase something. This can two or three times the amount of the initial purchase. They do this to ensure that there’s money in the account to cover your purchase. This hold can last for up to a week.
Credit cards don’t place holds when you make a purchase. You don’t have to worry about not having access to your money due to holds. Simply make your purchases, and the money transfers to the vendor right away. They know they’re getting the money, so there is no need for any additional holds.
Use Credit Cards Before Debit Cards Reason 7: Added Safety Measures
There are some things never to buy with a credit card. However, most times using a credit card adds an extra safety layer for your finances. It doesn’t have a direct link to your checking account. That money stays secure in the bank until you pull it out.
On the other hand, debit cards have a direct link to your bank account. This means that if someone gets your information, they could drain your account. While you may get this money back, it may take a few days or a week. That’s a long time to go with no backup and no resources.
Bottom Line Why You Should Use Credit Cards Before Debit Cards
It’s a good idea to use credit cards before debit cards for several reasons. We’ve outlined the top seven reasons why you want to have a credit card. Even if you don’t heavily use it, you want to start transitioning to it. You’ll get several benefits just from using your new credit card.