Why You Shouldn't Put Your Credit Card in the Sock Drawer

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Over the years, the prevalent form of payment has migrated from barter, to cash, to checks, to credit and debit cards. And payment methods continue to evolve — a 2021 GoCardless survey showed that 76% of Americans would like to decrease their use of credit cards. Still, before you take that credit card out of your wallet and put it in the proverbial sock drawer, here are a few reasons why it might still make sense to keep it in your payment rotation.

4 Reasons to Reach for the Credit Card Instead of Your Debit Card

You’ll Get Perks and Rewards

Many credit cards offer very attractive perks for using your card. This includes hefty welcome bonuses worth thousands of dollars as well as rewards for ongoing spending. If you’re hoping to shake off the pandemic blues and explore new places, many credit cards also offer airline miles, airport lounge access or other travel perks.

Other options include cashback credit cards that offer money back on every purchase. Different cards earn cash back in different categories and at different rates, varying from 1% to 6%. Using cash or your debit card instead means you’ll miss out on the opportunity to earn money while spending money.

Read More: What’s in a Credit Score?

You Can Improve Your Credit Score

Responsible usage of credit cards can also help build and improve your credit score. Your credit score is one of your most important assets, and having a high credit score can have a big impact on your finances. Even if you pay cash for every purchase, your credit score affects things like the interest rates that you get on car loans or home mortgages.

Federal law allows you to periodically get a free copy of your credit report. It’s worthwhile to check the report once a year to make sure it is up to date and doesn’t contain any incorrect information–a large part of your credit score is determined by how reliably you fulfill your promises to pay back extended credit.

You’ll Have Better Fraud Protection, and You Can Dispute Unauthorized Purchases

Matt Schulz, chief credit analyst at LendingTree, suggests that credit cards offer better consumer protections than debit cards.

“For example, if a bad guy gets ahold of a debit card, they can take real money from a real account and cause you real headaches when bills come due,” Schulz says. “Yes, you’ll likely get that money back, but until you do, it can make things kind of hairy.” Credit card fraud, on the other hand, can often get cleared up with a phone call.

According to the Federal Trade Commission, you’re potentially liable for up to $50 of credit card fraud, but most issuers offer zero liability, which means you’ll never need to pay for it. With a debit card, however, you have some exposure to liability. You won’t be responsible for charges made after you report your card lost or stolen, but if you wait too long to report it, you may be held responsible for a portion of the fraudulent amount. If you wait longer than 60 calendar days, you may have to foot the bill for the entire charge.

There Are Advantages When Renting Cars

Though many car rental companies let you rent a car with a debit card, they will generally put a hold on the funds in your account. This hold could be for hundreds of dollars, and you won’t have access to those funds until you return the car. In contrast, when you rent a car with a credit card, you won’t need to pay the bill until your next monthly statement. Additionally, many credit cards offer car rental insurance that will cover you in case of an accident.

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Enjoy the Perks, but Spend with Caution

The perks that come with credit cards can be great, as long as you use them responsibly. Make sure that you have the financial ability and discipline to pay your credit cards off in full, each and every month. If you overspend with credit cards, it can be easy to get into financial trouble, which may be one reason why nearly half of all credit cardholders prefer using debit cards.

Set yourself up for success by taking advantage of the different payment features your bank offers. “Let technology be your friend,” says Schulz. “Set up autopay to make sure you’re never late. Get text or email alerts to remind you of due dates or alert you to suspicious activity.” That being said, you still need to manually check in on your accounts because even the best technology glitches. “Remember, no one cares as much about your money as you do,” adds Schulz, “so please take the time to understand what you’re getting into before you apply.”

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