Many Canadians are often stuck making a decision when it comes time to make a purchase: should you use your debit card, or your credit card? Using your debit card will deplete your savings, while a credit card will leave them intact, at least for the time being. However, credit spending is what Ottawa is now urging us to cut back on the most – especially when there are so many other better kinds of borrowing. But there are cases to be made for the credit card, and those cases can be best argued when comparing credit cards with debit cards.
One of the best times to opt for a credit card rather than your debit is when you’re shopping online, and this is simply for the security they can give you. When you buy something online and it comes back damaged or ruined, a credit card company may be able to offer you some protection. Sometimes these cards come with additional warranties from the manufacturer, and credit card companies will sometimes fight the charge on your behalf. If however, you pay with your debit (or through PayPal, which can essentially be the same thing when taken out of your bank account) you’ll have no protection and if your purchase shows up on your door in poor condition, you’ll have to fight the store and/or the courier company yourself.
The biggest reason for using a credit card is always that it can help raise your credit score, if you have poor credit and are trying to improve it. Although homeowners will always be better off using a HELOC or home equity loan to improve their credit, those who don’t own their own home can find having one (and only one) credit card useful to improve their credit. By making small purchases and paying off those purchases every month, you show that you repay your debts, and that will improve your credit score. This can have numerous benefits, including improving the chances of getting a mortgage and one day, achieving home ownership. A debit card simply doesn’t come with these benefits.
When you’re considering using debit or credit, you’ve also got to look at all the little bonuses that come with using a credit card, and consider when it’s the right time to use them. Travel insurance, roadside auto assistance, and discounts on auto rentals. With a debit card, you really only have access to the money you put in there. It might not always be right to use a credit card, but if you’re traveling or need to use another car for a weekend, it might be the right time to try and pump up that credit score while reaping additional benefits.
It’s true that in most cases, there are much better forms of borrowing than credit cards. And, credit cards are very different from debit cards in the way that with the latter, you’re not actually borrowing at all. Still, when people are out shopping and they get to the counter and it’s time to pay, so many wonder whether they should pay with their credit card, or their debit card. It’s important to know before you go what you’re going to use to pay; and that you know when to use which one.
