Why Paying with a Credit Card is Safer than Debit Cards or Cash

Shante Abdo

Table of Contents Your money is protectedEnsuring your purchases are safeConsumer protectionsReturn protectionThe Platinum Card® from American ExpressRewardsWelcome bonusAnnual feeIntro APRRegular APRBalance transfer feeForeign transaction feeCredit NeededProsConsTravel insurance protectionChase Sapphire Preferred® CardRewardsWelcome bonusAnnual feeIntro APRRegular APRBalance transfer feeForeign transaction feeCredit neededProsConsCell phone protectionChase Freedom Flex℠RewardsWelcome bonusAnnual feeIntro APRRegular APRBalance transfer […]

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Everyone has their preferred way of paying for things. Some like using cash and coins, while others choose newer payment methods like Apple Pay. But other than earning heaps of travel rewards in the form of airline miles or hotel points, there are several other benefits of paying with a credit card.

Debit cards and cash offer consumers limited benefits, while 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.

Here’s what you need to know about the benefits of paying with a credit card over a debit card or cash.

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.

And 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 charged anything. If it’s within two business days that you report the loss, you can be held responsible up to $50. If it’s more than two business days but less than 60, your loss can be up to $500. If it’s beyond 60 business days, you could be held liable for all charges.

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 if a fraudster drains your checking account, this could send ripple effects throughout your personal finances, possibly leading to late bill payments 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 buyers 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. The card issuer will then reach out to the vendor to follow up, and make a decision if you should be refunded.

Consumer protections

The Platinum Card® from American Express

On the American Express secure site

  • Rewards

    10X points on eligible purchases on the card at restaurants worldwide and when you shop small in the U.S., on up to $25,000 in combined purchases, during the first six months of Card Membership, 5X points on flights booked directly with airlines or with American Express Travel (starting January 1, 2021, this applies on up to $500,000 per calendar year), 5X points on prepaid hotels booked with American Express Travel, 1X points on all other purchases

  • Welcome bonus

    100,000 Membership Rewards® points after spending $6,000 within six months of account opening

  • Annual fee

  • Intro APR

  • Regular APR

  • Balance transfer fee

  • Foreign transaction fee

  • Credit Needed

Pros

  • Up to $200 in annual airline fee credits
  • Up to $200 in annual Uber savings
  • Complimentary Global Lounge Collection access with more than 1,200 airport lounges across 130+ countries
  • $200 Hotel Credit: Get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings with American Express Travel when you pay with your Platinum Card.
  • $240 Digital Entertainment Credit: Get up to $20 in statement credits each month when you pay for eligible purchases with the Platinum Card at your choice of one or more of the following providers: Peacock, Audible, SiriusXM, and The New York Times. Enrollment required.

Cons

  • $695 annual fee
  • No special financing offers on new purchases

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.

Chase Sapphire Preferred® Card

  • Rewards

    $50 annual Ultimate Rewards Hotel Credit, 5X points on travel purchased through Chase Ultimate Rewards®, 3X points on dining, 2X points on all other travel purchases, 5X points on Lyft rides through March 2022, and 1X points on all other purchases

  • Welcome bonus

    Earn 100,000 bonus points after spending $4,000 on purchases in the first 3 months from account opening

  • Annual fee

  • Intro APR

  • Regular APR

    15.99% to 22.99% 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

Pros

  • Points are worth 25% more when redeemed for travel via Chase Ultimate Rewards®
  • Transfer points to leading frequent travel programs at a 1:1 rate, including: IHG® Rewards Club, Marriott Bonvoy™ and World of Hyatt®
  • Free DashPass subscription for a minimum of a year when you activate by December 31, 2021
  • Travel protections include: auto rental collision damage waiver, baggage delay insurance and trip delay reimbursement
  • No fee charged on purchases made outside the U.S.

Cons

  • $95 annual fee
  • No introductory 0% APR
  • Estimated rewards earned after 1 year: $1,506
  • Estimated rewards earned after 5 years: $2,528

Rewards totals incorporate the points earned from the welcome bonus

Cell phone protection

By simply paying for your cell phone bill with the right credit card, your cell phone 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. For example, the Chase Freedom Flex℠ offers cardholders up to $800 per claim and $1,000 per year, with a reasonable $50 deductible.

Chase Freedom Flex℠

  • Rewards

    Earn 5% cash back on grocery store purchases (not including Target® or Walmart® purchases) on up to $12,000 spent in the first year, 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate (then 1%), 5% cash back on travel booked through the Chase Ultimate Rewards®, 3% cash back on dining and at drug stores, 1% cash back on all other purchases

  • Welcome bonus

    $200 cash back after you spend $500 on purchases in your first three months from account opening

  • Annual fee

  • Intro APR

    0% for the first 15 months on purchases

  • Regular APR

    14.99% to 23.74% variable

  • Balance transfer fee

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

  • Foreign transaction fee

  • Credit needed

Pros

  • No annual fee
  • Generous welcome bonus
  • Opportunity to earn up to 5% cash back in select categories upon activation
  • Rewards can be transferred to a Chase Ultimate Rewards card

Cons

  • Bonus categories must be activated each quarter
  • 3% fee charged on foreign transactions
  • Estimated rewards earned after 1 year: $814
  • Estimated rewards earned after 5 years: $2,647

Rewards totals incorporate the cash back earned from the welcome bonus

Bottom line

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.

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