Why I Always Pay With a Credit Card (Never Debit)

Credit cards get a bad rep. They have a ton of fees, charge a boatload of interest, and can encourage destructive spending habits, the ol' swipe now, think later. With all that being said, I'm a big fan of them. I prefer credit cards over all other forms of payment (cash, debit, begging). They have a lot of upside if used properly.

Credit Card Best Practices

Pay your bills on time. This is obvious. If not, you'll get hit with late fees and damage your credit score.

Pay your balance in full. Don't just pay the minimum payment, pay it off completely. This allows you to sidestep their high interest rates (usually 16-20%). If you can't afford the balance, that's a sign you're spending too much. Cut it back.

Don't use all your limit. If your balance is always near your limit, it means you have high credit utilization. It shows credit bureaus you live/spend on the edge, this makes you look risky and hurts your credit score. A good rule of thumb is to keep your credit utilization at no more than 30%. So if you have a credit limit of $10,000, your balance should be no more than $3,000.

Avoid all fees. Don't go over your limit, don't use cash advances, don't buy the insurance, and if you pay an annual fee, the rewards better be worth it (do the math!). There are plenty of no-fee cards that will do the trick for most people.

Credit Card Benefits

Abiding by the best practices, credit cards effectively provide you an interest-free loan (sweet!). On top of that, most provide rewards (cash back, travel points, etc.). Rewards for purchases you would've made anyways, the trick is not making purchases because of the rewards. Don't spend more because you're chasing rewards. Spending more on restaurants because you get more rewards than with groceries is just bad math.

Most cards also have a bunch of benefits in the fine print. Purchase protection, extended warranties, roadside assistance, luggage insurance, etc. With debit cards, you get nothing.

Credit Cards Are More Secure

Aside from all the perks, credit cards provide superior fraud protection. When you pay with a credit card, you're using the bank's money, with a debit card, you're using your money. This is an important distinction.

If fraud happens with your debit card, tough luck. It's on you to fight to get your money back. If this happens with your credit card, the bank will use its full power to get their money back, and they love their money. As long as you report the fraud in a timely manner, it's the bank's problem.

Conclusion

Credit cards are a great tool if used responsibly. With the best practices in mind and you'll be able to make the most of your spending.

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