Most of us are lucky that we have several ways we can pay for things. But how do we decide which way is the best way? It depends on personal habits, what you're buying and where you're buying it.
Use a credit card when:
- You need to build your credit. "Establishing a good record of timely payments and keeping your balances at a modest level are great ways to build a healthy credit score," according to CreditKarma.com.
- You can earn useful rewards. People who pay their credit cards off each month can accumulate cash back, airline miles and other rewards for free.
- You're shopping online. Credit cards provide more purchase and fraud protection than debit cards if hackers should gain access to your account information.
- You need purchase protection or an extended warranty on a large purchase. According to TD Bank, some cards offer reimbursement on defective, damaged, lost, or stolen items.
Use a debit card when:
- You're making a small purchase at a small retailer. It costs small businesses more to process a credit transaction than debit.
- You want to track where your money goes. A debit card allows you to keep an electronic record of your purchases and even analyze your spending habits using an app such as LearnVest or Mint.
- You're a late bill-payer. Late payments on a credit card bill can hurt your credit score. If you're not good at paying on time, stick with debit or cash.
Use cash when:
- You need to stay on a strict budget. Once cash is gone, it's gone, and using it can help you live within your means. Some people also find that it's emotionally harder to part with cash than it is to swipe a card, so they're better able to control their spending.
- You're going to a place that may not accept credit or debit cards, such as a farmer's market or festival, or for event parking.
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