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Here are 3 reasons why paying with a credit card is safer than a debit card or cash

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Everyone has their preferred way of paying for things. Some like using cash while others prefer contactless payment methods like Apple Pay or Google Wallet. But other than earning travel rewards or cash-back, there are several other significant benefits of paying with a credit card.

While debit cards and cash offer consumers limited benefits, using a credit card can help protect you against purchases that go awry. A credit card is guarded from fraudulent activity and some offer benefits like travel insurance and return protection.

CNBC Select breaks down the benefits of paying with a credit card over a debit card or cash.

What we’ll cover

Your money is protected

When you spend on a debit card, the funds are taken directly from your checking account. Now what if your debit card, or even simply the information of your debit card, falls into the wrong hands? This leaves your checking account, your lifeline to pay bills or withdraw cash from an ATM, vulnerable.

Depending on the timeline of when you report it, you could be held liable for some of the damages. According to the Federal Trade Commission (FTC), if you report your debit card lost or stolen before any malicious charges are made, you won’t be responsible for any charges made without your authorization. If it’s within two business days that you report the loss, you can be held responsible for up to $50. If it’s more than two business days but within 60 days of your last statement, your loss can be up to $500. If it’s beyond 60 business days, you could be held liable for all charges.

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However, if someone makes unauthorized transactions with your debit card number, but you did not lose your card, you are not liable for any charges if you report them within 60 days of your statement being sent to you.

The trouble with this happening is that even though you might not be responsible for those charges, if a fraudster drains your checking account, this could send ripple effects throughout your personal finances. If you are unable to pay other time-sensitive bills, you could incur late payment fees for things such as a mortgage or personal loan. Late and missed payments can have a negative impact on your credit score.

With a credit card, fraudulent charges are much less of a concern, as it is not your money — but rather your credit. And nearly all credit cards come with zero liability protection.

Ensuring your purchases are safe

You’ve likely experienced buyer’s remorse at one point or another. It can be for a number of different reasons, from being displeased with the quality of the product, to the vendor not delivering on what it promised. When you purchase with cash or a debit card, your protections mostly rely on the retailer’s return policy. With a credit card, you won’t be at the whim of the vendor, there are other avenues you can take to rectify your purchase.

If you’ve used a credit card to buy something, you can call your credit card issuer to dispute the charge. Sometimes called a chargeback, this is where you contact your bank to notify them that a purchase was never received or arrived damaged.

This will typically mean filling out a short form, describing what you purchased, and why you aren’t satisfied with the purchase. This can also be done if you never received an item, if you were charged an incorrect amount or if the business charged you for other items or services you didn’t agree to. The card issuer will then reach out to the vendor to follow up and make a decision if you should be refunded.

Consumer protections

In addition to disputing purchases, credit cards come with a long list of consumer protections. However, not all credit cards offer all of these, so it is important to find the best credit card for you by looking into all of their benefits.

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Here are a few consumer protections credit cards provide:

Purchase protection

Purchase protection can reimburse you for damage, loss or theft of items you’ve recently purchased.

For example, the Chase Sapphire Reserve® Card offers one of the longest coverage periods, offering protection for 120 days from the purchase date. Many items qualify for this coverage, but some notable exclusions are perishables, collectibles/antiques, computer software and used/pre-owned items.

Chase Sapphire Reserve®

  • Rewards

    Earn 5X total points on flights and 10X total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3X points on other travel and dining & 1 point per $1 spent on all other purchases plus, 10X points on Lyft rides through March 2025

  • Welcome bonus

    Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $900 toward travel when you redeem through Chase Ultimate Rewards®

  • Annual fee

  • Intro APR

  • Regular APR

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

Return protection

Some merchants do not have flexible return policies. But with certain cards, if you make a purchase, attempt to return the product for a refund, and are refused, this would activate the return protection policy.

Several American Express cards, including The Platinum Card® from American Express, offer this policy. If you attempt to return the item within 90 days of purchase and the merchant refuses, American Express may refund the full purchase price up to $300 per item and up to $1,000 per calendar year in claims.

Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details.

The Platinum Card® from American Express

On the American Express secure site

  • Rewards

    Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year, 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel, 1X points on all other eligible purchases

  • Welcome bonus

    Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.

  • Annual fee

  • Intro APR

  • Regular APR

  • Balance transfer fee

  • Foreign transaction fee

  • Credit Needed

Travel insurance protection

Travel insurance has become an increasingly popular benefit for consumers after Covid-19 induced massive travel restrictions and cancellations. By having a credit card like the Chase Sapphire Preferred® Card your trip is protected as long as you pay for your travel expenses with the card. The policy comes with several coverages, such as trip cancellation and interruption insurance, baggage delay insurance and trip delay reimbursement. Eligibility and Benefit level varies by Card. Terms, Conditions and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details.

Chase Sapphire Preferred® Card

  • Rewards

    $50 annual Ultimate Rewards Hotel Credit, 5X points on travel purchased through Chase Ultimate Rewards®, 3X points on dining, 3X points on select streaming services and online grocery purchases (excluding Target, Walmart and wholesale clubs), 2X points on all other travel purchases, and 1X points on all other purchases

  • Welcome bonus

    Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That’s $750 when you redeem through Chase Ultimate Rewards®.

  • Annual fee

  • Intro APR

  • Regular APR

    21.49% – 28.49% variable on purchases and balance transfers

  • Balance transfer fee

    Either $5 or 5% of the amount of each transfer, whichever is greater

  • Foreign transaction fee

  • Credit needed

Cell phone protection

By simply paying for your cell phone bill with the right credit card, your mobile device can be covered up to a specified amount for damage, loss or theft. There is likely a deductible if you file a claim, and documentation may be needed by the insurance company.

The Wells Fargo Autograph℠ Credit Card offers up to $600 worth of cell phone protection when you pay your monthly cell phone bill with your eligible card, and has a relatively low deductible of $25. This covers “damage to, theft of, or involuntary and accidental parting of a cell phone” and you are eligible to make up to two claims per 12-month period provided your cellphone is qualified.

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Wells Fargo Autograph℠ Card

On Wells Fargo’s secure site

  • Rewards

    Earn unlimited 3X points on restaurants, travel, gas stations, transit, popular streaming services and phone plans. Plus earn 1X points on other purchases

  • Welcome bonus

    Limited time offer: Earn 30,000 bonus points when you spend $1,500 in purchases in the first 3 months – that’s a $300 cash redemption value.

  • Annual fee

  • Intro APR

    0% intro APR for 12 months from account opening on purchases

  • Regular APR

    20.24%, 25.24% or 29.99% variable APR

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

FAQs

Why is it better to pay with a credit card?

Paying with a credit card not only provides you with an extra layer of security compared to a debit card, but rewards you with cash-back, redeemable points or travel miles. Some credit cards also have welcome bonuses in addition to other ongoing perks.

What are the advantages of paying with a credit card?

Paying with a credit card offers advantages like a grace period before your statement is due, fraud protection, opportunities to earn rewards, welcome bonuses and more.

What items should you not purchase with a credit card?

There are a few places you might be better off not using a credit card, such as an ATM as that is considered a cash advance that will immediately accrue interest. Additionally, some merchants may offer a discount to cash customers.

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What should you think about when paying with a credit card?

Before paying with a credit card, make sure you afford the transaction and will be able to pay for it when the statement arrives as you wouldn’t want to rack up high interest fees. You should also consider whether a merchant will charge you a fee for paying with a credit card.

Bottom line

Using a credit card correctly can turn it into a resource that can provide consumers with certain protections that other forms forms payment simply can’t. However, they must be used responsibly and it is best to pay them off in full each month in order to avoid costly interest payments. If you can spend responsibly, the extra protections offered by credit cards rather than paying with a debit card or cash make them a worthwhile investment.

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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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For rates and fees for The Platinum Card® from American Express, click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.



Source: CNBC

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