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‘Credit or Debit?’ You’re used to hearing this question when checking out at the grocery store, but have you ever stopped to think about what your choice means in terms of your financial security?Using a credit or debit card does makes you vulnerable to fraud, but the fact that 62 percent of purchases in 2009 were made using electronic payment methods* suggests it's not stopping consumers from using their plastic. Cash may be safer in terms of fraud, but it's simply not a practical option for our day-to-day needs. So this begs the question, ‘credit or debit?’ when it comes to fraud protection. Fortunately, the major credit and debit card networks (i.e. VISA and MasterCard) adhere to a strict 0 percent liability policy for victims of fraud. That means that whatever money is stolen from you via your debit or credit card will be returned in full. That does not mean, however, that you will have the same experience getting your money back with both your debit and credit card. Your debit card, as we all know, is tied to your checking account. This is your actual money – the money you use to pay for groceries, gas, utilities, and major expenses like your mortgage payment. If someone wipes out your checking account, you have a serious cash flow problem. You won’t have access to the money you need to make these important purchases or payments until your debit card issuer is able to sort out the fraud claim. While you’ll get your money back eventually, that doesn’t mean you’ll get it before you bounce your rent check or need to do your weekly grocery shopping. Your credit card, on the other hand, isn’t tied to real money at all. If someone maxes out your credit card, you’re not out anything that you’ve earned. Simply dispute the charge and your credit will be restored. In most cases, you won’t even become responsible for the debt for one to two months after the fraudulent charges have been made. This is more than enough time for your credit card company to sort out the fraud claim before the debt becomes your responsibility. Because of these factors, it is my recommendation that you use a credit card for day-to-day purchases. Not only are you risking less in terms of fraud, but if you have a rewards credit card you also have the opportunity to earn extra cash or airline miles on your purchases. Your debit card is simply withdrawing your money and giving you nothing in return. I also recommend signing up for ACH to have your credit card payments automatically withdrawn from your checking account every month. This way you won’t have to worry about paying your credit card bill on time and your bill will be paid in full. Of course, a credit card is not a good option for a person who is incapable of managing their credit responsibly. For everyone else, though, a credit card can offer less hassle and more peace of mind when it comes to protecting your money. * Source: CSCU, The Nilson Report, VISA

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