Often we focus on saving and planning for the future. But spending your money wisely is another important facet of financial planning. So, let’s switch gears, and talk about why credit cards are preferable to debit cards in most circumstances.

Reduce the risk. Using any card opens you up to potential for theft. Skimmers on gas station payment terminals, dishonest waiters, and other situations can lead to stolen card numbers. But with a credit card, the thief usually needs more than just the number to use it. The company might even notify you and lock your account when their algorithms detect unusual activity.

Plus, debit cards are linked to your checking account. Once used, the money is gone – usually forever. Credit card companies, on the other hand, are often willing to reverse fraudulent charges.

Credit protects your purchases. Most credit card companies offer additional warranties or other types of purchase protection. If you use a debit card for those same purchases, you might simply be left with buyer’s regret.

Credit offers leverage. Let’s say you do have a problem with a purchase, and a merchant is reluctant to resolve the issue. If you used a debit card for the purchase, you might just be out of luck. But if you mention reporting the regretful purchase to your credit card company, they will often change their tune.

Why? Too many of these reports will threaten a merchant’s status with the credit card company, and they might be charged fees.

Credit comes with rewards. Many credit card companies offer rewards between two and six percent on purchases in various categories (or on all purchases, overall). That’s like earning a discount on every purchase, so why turn down an opportunity?

Of course, interest charges are the downside of credit cards. When using a credit card, make sure to pay off balances by the due date, to avoid paying interest. When managed correctly, credit can serve as a wise financial planning tool. For other tips on budgeting, spending, and planning for the future, call us to schedule a consultation.