Should You Use Credit Or Debit Cards For Holiday Shopping?Submitted by Miller Financial Group | Red Oak Iowa Financial Advisor on November 26th, 2019
Should You Use Credit Or Debit Cards For Holiday Shopping?
By: Daniel S. Miller, CFP®
The Season is here and holiday shopping is underway for many with “Black Friday” and “Cyber Monday” already behind us. While the season brings a lot of hustle and bustle to our lives, this season also brings one small question you might ask yourself. If not using cash, should you pay for your items with a credit or debit card?
There's a lot of debate about whether you're better off using a credit or debit card because both have a few advantages and drawbacks. Some experts may recommend sticking to a debit card if you're on a budget so that you aren't tempted to spend more than you can afford, and then end up paying high interest later. Those are legitimate concerns and those who are trying to stick to a holiday budget should be mindful of how they spend their money. But there are also several reasons credit cards can be a viable option for holiday shopping.
Credit Cards Impact Your Credit Score
No matter what time of the year it is, you should always be taking a look at your FICO score and doing what you can to improve it. By using your credit cards and then paying off the balance in full after holiday shopping, you may be able to enter the new year with a better credit score than what you had before. Perhaps in doing so, set yourself to begin fulfilling a new year's resolution! Improve mu Credit Score! Remember, the higher your credit score, the lower the interest rates you may be eligible for new loans or even new credit card accounts you might want to open.
Credit Cards May Come With More Perks For Holiday Shopping
While it is possible for debit cards to have rewards included in their program, credit cards typically have more reward opportunities. For example; you may be able to receive certain discounts for shopping at certain retailers, or receive cash back if you purchase a certain amount of products. Many credit card companies even offer travel points if you fly with certain airlines, or even discounts you can apply when you book a hotel room. You need to weigh the rewards against your budget, and you of course not overspend just to redeem a reward. But if you can stay within your budget and receive rewards for your credit card, why not take advantage of that?
Credit Cards May Have A Little More Security For Certain Purchases
The holidays are unfortunately a time for identity thieves to be at work trying to get a hold of financial information such as bank account numbers, and credit and debit card information. Depending on where you bank, your debit card certainly may have many security mechanisms in place to help prevent fraudulent charges from happening. But typically credit cards have even more security built into them. Many credit card companies have invested in high security mechanisms such as sending an automated phone call to the customer if the system detects an unusual charge to a credit card. Or, utilizing Two-Factor authentication for certain transactions, etc. Also, with laws like the Fair Credit Billing Act in place that are meant to mitigate fraud, you may be better off using a credit card since disputing fraudulent charges on a debit card vs. a credit card may be more difficult.
The use of credit and debit cards has revolutionized how we shop and interact with retailers. So, I encourage everyone this holiday season to be smart with how you use theses “tools” and be diligent with their security. The last “gift” anyone wants to receive this year is for their credit to be hurt or their identity compromised!
*Material presented is not intended as tax advice. For specific tax advice, please contact your own qualified tax professional.
Daniel S. Miller, CFP® is President of Miller Financial Group, Inc. with offices located in Bellevue, NE and Red Oak, IA. Dan and his team serve clients throughout the country as they prepare for the next stages of their financial lives. Dan is a published author of the book “Retirement Built to Last: Planning for When the Paychecks Stop” and has had articles published in the Wall Street Journal, Financial Advisors IQ, Successful farming and The Hill. He is also a dedicated husband, father, and advocate for the financial planning process and financial education.
Dan Miller, David Eads, Kaleb Robuck, and Marcus Taylor are investment adviser representatives of, and securities and advisory services are offered through, USA Financial Securities Corp. Member FINRA/SIPIC. A Registered Investment Advisor located at 6020 E Fulton St., Ada, MI 49301. Miller Financial Group is not affiliated with USA Financial Services.