Rivers soak into your bones.
27.08.2024 - 19:04 / thepointsguy.com
On the outside, credit cards and debit cards look very similar: Both have 15-16 digits, expiration dates and security codes.
In reality, credit cards and debit cards are not the same, and there's often debate in the financial world over which type of plastic is best for the consumer. Some financial pros are firmly in the pro-debit card (or cash) camp. Here at TPG, we believe that credit cards are a much better choice for your spending.
We'll explain how debit and credit cards work and give three reasons why we think it's better to put your debit card away and pay with a credit card instead.
Related: How to choose the best credit card for you
Debit cards are tied to your bank accounts. When you use your debit card to make a charge, the funds are withdrawn right away (or within a few days) from your account. If you try to use your debit card for a purchase that costs more money than you have deposited, your bank will generally decline the transaction.
Your credit card, on the other hand, works like a portable, flexible loan. You can borrow money (up to your credit limit), pay it off and borrow again. You can repeat this process repeatedly as long as your account is open and in good standing.
As you use your credit card through a billing cycle, your charges tally up on your monthly statement. It's up to you whether to pay off the entire balance by the due date (strongly recommended) or to make at least the minimum payment toward the amount you owe.
Some people avoid credit cards due to the fear of getting into serious financial trouble with debt. This is a valid concern since credit card interest rates are generally high and can add up quickly. You should certainly work to avoid credit card debt, but you can still reap credit cards' many rewards by practicing responsible credit card use.
Related: TPG's 10 commandments for credit cards
If we put points and miles aside for a moment — just for a moment — the best perk that comes from credit cards is the protection they offer.
First, those pieces of plastic (or metal) protect you from liability for fraudulent transactions. If you lose a credit card or it's stolen and someone else starts charging on it, the federal government has your back.
The Fair Credit Billing Act limits your liability for fraudulent transactions on your credit card to just $50 (and most major card issuers waive even this responsibility as a matter of policy). Ensure you report the unauthorized transaction within 60 days of your statement date, and you're covered.
Debit cards are protected from fraudulent transactions, too, thanks to the Electronic Funds Transfer Act. However, your liability increases up to $500 if you don't catch and report the problem within two business days. Also,
Rivers soak into your bones.
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