Credit vs. Debit

I've always contemplated the benefits of credit vs. debit, but I remain torn as to which to use. I am learning to settle with... Both.

Debit:

It's like having cash, so purchase amounts are instantly deducted from your checking account value. There's no remembering to pay your credit card bill. Nice!

You'll never pay a penny in interest therefore, and odds are your checking account doesn't pay interest, so you're not missing any extra interest revenue. It's a win-win!

Technically, you're never indebted to anyone at any time (unless you overdraw your account). Talk about easing your conscience...


Credit:

You have the ability to dispute a charge that you believe stems from fraudulent roots. For example, the product you receive is worth much less than you what you anticipated, or perhaps you accidentally got double charged.

You have the ability to charge purchases all the way up to your credit limit. Essentially, you don't really have to worry about not being able to pay for something. Debit cards limit your purchases to the amount of money in your checking account at the time, and banks sometimes even charge for each debit card transaction.

Many credit cards have no annual fee, and even offer rewards for using them! Assuming you remember to/can afford to pay your fill in full, on time, you can actually become better off by using the credit card.

If you have a checking account that pays interest, and you pay your credit card bill from that checking account, then delaying payment for purchases by using credit can improve your interest income.

Using a credit card appropriately almost always improves your credit, which is important for when you go to attain a mortgage or lease later on for something that costs much more (i.e. a house or car for tens or hundreds of thousands of dollars).

What to Use When/Where:

What I recommend:

Items that are unlikely to need returning, like groceries or gasoline, should be purchased on debit. In doing so, you've paid upfront, and never have to worry about paying your bill or having interest accumulate on those purchases. Use debit on things that will be consumed right away or in a short amount of time.

Use credit to purchase items that have the possibility of being defective (i.e. electronics equipment), or for larger purchases that your bank may restrict your debit account from paying. With credit, if you're ripped off then you have legal rights and the support of your card company in returning the item and/or not paying for the defective item.

It would appear as though there are more benefits to using credit than debit, but I feel that the reasons for using debit hold a fair amount of weight in themselves.

Dispute that Charge!

In reading an article and its associated line of comments today my debate over credit vs. debit was made tougher (look forward to a post about this).

Apparently, a guy purchased a Western Digital hard drive at a Best Buy in New York City, and when he got home and opened the box, it contained six heavy bathroom tiles wrapped in newspaper. Oddly enough, the Best Buy apparently told him that he was SoL on the matter, and that he should absorb the loss for this scam.

One of the first things he said he did after being told this, was contact his credit card company, American Express (Amex), and tell them to withold payment on his card. This is called "Disputing the Charge."

According to MSN Money, "Credit card purchases are protected under the Fair Credit Billing Act."

According to this article, some stipulations that apply are:

1) You must make a concerted effort to resolve the dispute with the merchant involved.
2) The payment amount must be greater than $50 and have taken place in your home state, or within 100 miles of your home.

If these both apply, then you can make a dispute... although some card companies will provide you assistance anyways, generally because they value your business.

What to do to make your claim: argumentation, stipulation, documentation, registration, evaluation. What I means is that first you must argue the claim with the vendor or merchant, then see if you qualify under the stipulations above, or per your credit card company's rules, then create your claim on paper and submit it with any and all supporting documents, like complaint letters to the vendor, to your credit card company. At that point, your claim is registered and finally after the credit card company has performed its job/research, it makes an evaluation on your claim, choosing either to award the claim in your favor and credit your account (if they haven't done so already), or deny your disputed charge. *Shwew!* Again, MSN Money lays this all out very nicely.