Related Credit Card Article

"Could you benefit from using a credit card instead of a debit card?"

By admin | December 12th, 2008 | Featured

There are millions of people that use credit cards to make purchases such as day to day purchases or special occasion purchases like Christmas shopping, but an even greater number of people tend to use debit cards to make these purchases. Whilst both credit and debit cards can prove convenient for making purchases some industry officials have suggested that many of those using debit cards to make regular purchases could actually be missing out on rewards or cash back by failing to use an appropriate credit card instead.

People that use their debit cards to make purchases already have the money in their accounts, and this is the money that is used on making their purchases. Some experts have said that many of these consumers would be better off putting the money to one side, and instead of using their debit card to make day to day or special purchases using a rewards based credit card instead. Once the statement for the month’s spend comes through the consumer can then use the money that was put aside to pay off the balance in full, thus incurring no interest. At the same time the consumers will have earned valuable rewards or cash back of using the credit card.

Officials from American Express have said that some people may be losing out on hundreds of pounds a year by using a debit card instead of a cash back credit card to make regular purchases, although the losses would depend on how often the card is used and how much is spent on the card. In fact, the lender claims that by switching to a cash back card and earning money back on purchases rather than using a debit card and earning nothing, consumers may be able to go some way towards weathering the effects of the credit crunch, which has left many consumers in a tight financial situation.

The Vice President of lending at American Express, Tom Allder, recently stated: “Each British household is paying out thousands of pounds a year on debit cards for everyday items such as supermarket shopping and petrol. Simply by changing the way they pay for these items, people could be earning themselves hundreds of pounds of free cash.”

With just one fifth of consumers using a credit card to pay for supermarket shopping compared to nearly a half of consumers that use debit cards, it seems that many of us may actually find that we are better off by using a cash back or rewards credit card, accruing the rewards, and then repaying the balance before any interest is charged. This may be a particularly useful tactic over the Christmas and New Year period, when many will be spending hundreds or even thousands of pounds on gifts, clothes, entertainment, and socialising, which could mean the ability to accrue a significant level of cash back or rewards.

Tags: credit card, debit card

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