SAN ANTONIO — San Antonio’s average holiday budget this year is $800 according to a WalletHub study. Yet, you need to be smart about what card you use when you spend that money. Credit and debit cards look similar but are not the same.
The biggest difference between credit and debit cards is the protections they offer. A debit card is similar to cash because it is linked directly to your bank account.
“If somebody gets ahold of your debit card, they can take real money out of a real checking account and can cause you real problems if that money is still gone when your other bills come due,” said Matt Schulz, chief credit analyst for Lendingtree.com.
Debit cards can make sure you do not overspend, but credit cards offer more protection if you dispute charges.
“If a bad guy gets a hold of your credit card, it’s a whole lot easier and a whole lot less headache to deal with that fraudulent charge than it is with a debit card,” Schulz said.
“A credit card is really the bank’s money up until you pay them back,” said Ted Rossman, a senior credit industry analyst with Bankrate.com. “So you have more fraud and dispute resolution benefits.”
Credit cards can also offer extended warranties on certain purchases, purchase protections, travel insurance, and rewards.
“It can be easy to overlook that 1% or 2% cash back that credit card rewards would give you,” Schulz said. “The truth is that everything matters. Everything can help you extend your budget.”
Credit cards are best for online shopping because they offer stronger fraud protections.
Here is how to use a debit card safely online:
- Never use public Wi-Fi.
- Make sure the website you are buying from is legitimate. Reputable retailers will have an “s” in the "http" portion of their web address. It means secure.
“You want to stick to sites that you’ve been to before, bigger, more reputable websites,” Schulz said.
- Or use a digital wallet.
“Sometimes intermediaries like PayPal will have added fraud protection so you can actually tie your bank account or debit card in with that,” said Rossman. “Mobile payments are often more secure because you prove it’s you because of the face ID or thumbprint. So you can tie a debit card to that. I would say credit cards are more secure, if you can. Of course, we are worried about those high-interest rates.
Carrying a balance on your credit card can add to your debt.
“If you have debt, it’s really important that you have a plan to tackle it,” said Bola Sobunbi, with Tally, a credit management app. “It is so important that people are realistic and intentional about debt going into the holiday season.”
That way you do not pay for this year’s gift long after the holidays end.
A word of warning about store credit cards. More than likely you will be offered one or more as you do your holiday shopping. They can offer great rewards, but store cards often have even higher interest rates than regular credit cards.
“Those interest rates can be sky-high,” Schulz said. “Some of them can even be as high as 30%.”
Regular credit cards have about a 19% interest rate. If you cannot pay off the balance monthly, they are not the best way to make a purchase.