Debt Consolidation: When to Use Credit
Use Credit Cards in Situations where Using a Debt Card Puts you Cash Flow at Risk
Because of the number of people who have had to opt for debt consolidation, consumers now use debit cards instead of credit cards more often. However, in certain instances, it makes better sense to use your credit card. Debt consolidation, if anything, should teach you how to use credit more wisely. Use that wisdom, then, to use your credit card in circumstances where using a debit card puts your cash flow more at risk.
A Credit Card is Generally Recommended for a Major Purchase
For example, it’s better to make a major purchase, especially online, with a credit card. Credit cards offer you the flexibility to stop payment if you are not happy with your purchase. The issuer of the credit card, too, usually investigates any problems related to purchases. If you use a debit card, however, you will need to resolve any purchase problems yourself. Plus, you can’t stop the payment as it is taken out of your checking account immediately.
Use a Credit Card for Purchasing Gas for Business or Travel
Credit cards, as well, are better used for purchases of gas, renting cars, and hotel stays. That’s because these types of establishments can put a hold on debit card funds for several days until the transaction is processed. Therefore, using your debit card at these establishments can sometimes result in overdraft fees or declines.
Rewards Credit Cards Should Not Be Used Unless You are Able to Pay off the Monthly Account Balance
Credit cards, too, give you incentives for charging purchases whereas debit cards do not offer the same amenity. However, rewards credit cards also tend to charge higher rates of interest, so they shouldn’t be used unless you can afford to pay off the accumulated balance each month.
It’s Safer to Use Credit
Take into consideration too that your liability is greater with respect to the unauthorized use of a debit card versus a credit card. While you will be liable for as much as $50 in unauthorized transactions on a credit card, you can be assessed up to $500 in liability if you don’t report a card or PIN number as lost or stolen immediately for a debit account. What’s more, if you find any questionable charges on your debit card, you must report the activity within a period of 60 days or you may be found accountable for any unauthorized transactions after the statement date.
Pay Down your Debt Consolidation and Use Future Credit with more Discernment
While over 50% of purchases are now made with debit cards, credit, when used responsibly, can be a safe and secure way to make purchases online or safeguard the cardholder in case of theft. Paying down a debt consolidation then can assist you in using future credit with more discernment.
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