By Ryan Laspina
Senior Specialist, Red Flags and External Reviews at APUS
In today’s world, most transactions are completed through either a debit or a credit card instead of cash. Both of them have advantages and disadvantages, and it is important to understand the most efficient way to use both if you want to stay financially literate. Whether you utilize one, both, or neither, the below tips will aid you in your quest to become financially responsible.
- The most simple and efficient way to pay for purchases today is through the use of a credit card. The convenience is an advantage, but it can also serve as a disadvantage. Remember, buying things on credit means you do not necessarily have the funds to pay for your purchase at that time. If you are not careful, this can get you into financial trouble. To avoid issues, you should ask your credit card company (if they have not done so already) to cap your maximum monthly limit to an amount you can handle.
- Because the use of plastic cards has increased, the rate of fraud has also increased. At some point in their life, everyone will probably be a victim of credit card or debit card fraud. It is much easier to correct credit card fraud. If you see a strange charge on your bill, you can put that amount into dispute and refuse to pay for it. Most credit card companies have a very good fraud department who will investigate the matter for you.
- Using (and paying off) your credit card on a monthly basis helps to build credit. This will come in handy when you are ready to make a very large purchase, such as obtaining a car loan or a mortgage.
- Debit cards are also extremely convenient to use. When you use your debit card, you are using funds that you currently have sitting in your bank account. If you do not have the funds, you will not be able to make the purchase with your debit card. If you exclusively use your debit card, you will not have to worry about making purchases with funds you do not currently have.
- As stated before, it is much easier to correct credit card fraud as opposed to debit card fraud. With a credit card, you can simply refuse to pay for the illegitimate purchases. If you have money taken out of your account via your debit card, you will have to work with your bank to get the funds put back into your account. This is a stressful and involved process that does not always bring desired results.
A responsible adult should be able to handle at least one credit and debit card at the same time. Because neither is completely secure, it is advisable to use your credit card (as long as you are responsible) for most of your purchases in which you will not be using cash. It is a personal preference, but knowing how to use each efficiently will help you become even more financially literate.