It may surprise you, but back in 2003, credit card and debit card purchases of retail goods and services exceeded purchases made using cash and checks. And now, Visa just reported, during the last three months of 2008, the total dollar volume of purchases made using Visa debit cards surpassed Visa credit card purchases for the first time ever. How come?
According to a story in The Wall Street Journal (4/30/09), “The recession is giving many consumers second thoughts about their credit cards. Lenders also are making it more expensive to charge purchases and are lowering credit limits on credit card users.... Revolving debt, which mainly reflects credit card loans, fell 9.7% in February.”
So which card should you use when shopping: debit or credit? Obviously, if you’re often short of cash and use credit cards as instant—though high-interest—loans, you’d probably use your credit card(s). But if you have a choice, a debit card (which works like an electronic check) may be the better way to go. There are no finance charges to pay and no credit limit other than what’s in your bank account. Also, a debit card is usually easier to obtain than a credit card if your credit history is new or not terrific. And it’s usually better to give teenagers a debit card to use than a credit card.
However, if an unauthorized person uses your debit card (after somehow learning your PIN), your entire bank account might be emptied. Also, you may have only two days to report the theft of a debit card to minimize the loss, but a longer time period for a credit card.
