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Go Debit or Credit?

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Confused which card to use?

Holiday shoppers face the same dilemma each year: Do I swipe my bank credit card, bank debit card or sign-up for a store card with my favorite retailer?

Consider that a bank credit card is money you hope to make, while a bank debit card is money you have in hand. Numerous studies over the past 25 years reveal that consumers spend around 30% more on purchases with a bank credit card, compared to a bank debit card or greenbacks. But, credit cards have huge advantages if used responsibly. Besides hopefully earning generous rewards or rebates for each purchase, credit cards are funded by “OPM” (Other People’s Money) whereas debit cards are funded by “YHC” (Your Hard Cash). This may not seem to be a big deal but it can become a big deal if you have a problem with a purchase or you lose your card. Disputing a credit card transaction is easy and efficient. It may temporarily affect your credit limit, but with a bank debit card it could take several days or longer to replace the cash in your bank account. Chances are your credit card was issued by one the largest issuers in the country. They maintain the best customer service centers (24 x 7 x 365) and resolving a problem is quick and painless. Chances are your debit card was issued by a local or regional bank — contacting them on a weekend or holiday or after business hours could be challenging. Meanwhile, credit cards offered by your favorite retailer can be very rewarding.

Most store cards offer special discounts, promotions and exclusive sales for cardholders. Furthermore, exchanges or returns are super easy. However, retail cards typically carry sky high interest rates, often 20 percent or more. The key is to use them wisely by paying them off promptly. They can be a great way to build your credit if you don’t carry a balance or much of a balance. If you don’t foresee yourself being able to pay off the card(s) on time, the 20 percent in interest will soon offset any money you saved from using the special discounts.

Best overall advice: use a bank credit card for purchases over $50 and debit cards for all the small stuff. Always read the fine print and think carefully about your spending habits before considering any card.

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